U.S. retailers warn of increased prices due to biofuel mandate

by Inside Logistics Online Staff

The U.S.-based National Retail Federation (NRF) says federal biodiesel mandates are too high and will drive up inflation for already high food prices, especially processed foods that rely on food oils from crops like soybeans.

The U.S. Environmental Protection Agency (EPA) set the Renewable Fuel Standard program’s biodiesel blending mandate for 2022 at 5.63 billion gallons, a 22 percent increase over 2020.

The increase came even though NRF asked the EPA in February to keep the biodiesel mandate at 2020’s 4.63 billion gallons temporarily to allow supplies of the oils to catch up with demand. NRF cited the Clean Air Act, which requires the EPA to consider commodity and food prices when setting RFS levels.

“For more than a year, we’ve alerted the EPA and the administration about the shortage of food oils, which is causing significant disruptions throughout the supply chain and raising food costs for consumers,” said David French, NRF’s senior vice-president for government relations and executive director of NRF’s National Council of Chain Restaurants division.

“Food manufacturers simply can’t get their hands on enough of these oils to make everyday foods from bread and buns to condiments and dressings, and the problem is even worse for small and medium-size manufacturers.”

Shortage of edible oils

The move comes amid a global shortage of edible oils that has been driven by their increased use as biodiesel fuel and, more recently, Russia’s invasion of Ukraine, the world’s largest producer of sunflower oil. Governments around the world have recently enacted biofuel mandates similar to the U.S. RFS program, requiring ever-higher volumes of corn ethanol and soy biodiesel and requiring crops to be diverted from food production.

The NRF claims the situation with soybeans has become particularly acute during the last two years, with supplies of soybean oil for food use crowded out by government-imposed demand for use as biodiesel. Some U.S. states have enacted their own biofuel mandates on top of the federal requirement, leading to fierce competition between biodiesel refineries and food manufacturers that rely on a steady supply of soybean, canola, sunflower and other edible food oils.

However, biofuels producers disagree. “The Retail Federation gets it wrong when they claim that biodiesel producers are outbidding them for oil supplies. Our industry faces the exact same prices and market constraints in obtaining supplies of oil. As with all commodities today, the price of soybean oil is high because petroleum prices and supply chain disruptions are being passed through,” said Paul Winter, director, public affairs and federal communications at the Clean Fuels Alliance America, in an email.

Winter suggests that the shortage of diesel fuel in the U.S. is driving inflation – raising the cost of delivering retail goods and commodities across the country. “Without the supply of biodiesel and renewable diesel available today – to meet five percent of U.S. demand for heavy duty transportation – fuel costs would be higher, around US$0.22 per gallon. That increase would pass through to the costs of retail goods – likely exacerbating supply chain issues and impacting consumer demand,” he said.

Backseat to refiners

“American farmers are producing more and more soybeans but it’s not enough to keep up with demand from biofuel refiners,” French said.

“We asked the administration for a temporary reprieve until enough supply can be brought into the system that food manufacturers aren’t totally crowded out by refiners. It’s not just a price issue. Over the next two years or so, there simply isn’t enough food oil for everyone, and unless the biodiesel mandate is temporarily relaxed, food manufacturers and American consumers will take a backseat to fuel refiners.”