Data shows that US biofuel production increased in October as profitability improved.

According to AEGIS Hedging, the margins on biofuels helped U.S. producers of renewable diesel and biodiesel to increase their operations to multi-month levels in October.

The data shows that renewable diesel producers used 77% of their total operating capacity in October, which is the highest level since July 2024. The data showed that biodiesel plants were used at 89% of their total capacity in October, the highest level since July 2024.

The biofuels industry is relieved to see that utilization rates are improving and margins are increasing after a difficult start in 2024, when demand growth slowed and the market became oversupplied, forcing several biodiesel plants to close.

Renewable diesel and biodiesel both cost more to produce than regular diesel. This makes suppliers reliant on government incentives, such as tax credit. Renewable diesel is the fuel of choice for suppliers because it offers better incentives and can replace diesel completely.

According to the U.S. Energy Information Administration, data released on Tuesday showed that total biodiesel capacity dropped 4.2% over the past year to 2 billion gallons.

The EIA data revealed that the capacity of renewable diesel production increased by nearly 19% over the previous year to 4,58 billion gallons, in October. This is because most biofuel plants built in the last three years are geared toward it.

Still, the oversupply caused renewable diesel production capacity to fall 6% in October compared to a record 4,90 billion gallons of June.

Zander Capozzola is vice president for renewable fuels and said that in addition to the plant closures in October, the profitability of the industry was boosted by an increase in the amount of credits needed for compliance with federal mandates for biofuels.

D4 Renewable Identification numbers, issued for the production of biodiesel or renewable diesel, increased from 56 cents per number in September to more than 71 cents each month in October. This improved profitability for fuels.

He said that the margins were also helped by a stronger demand for Diesel, which reached a year-high in October and raised prices for both conventional fuels and their alternatives.

AEGIS reports that the prices for credits under California's Low Carbon Fuel Standard Program, where the majority of biofuels consumed in the U.S. are produced, have also risen from less than 60 cents per credit in September to more than 70 cents in October.

"You had really everything going in the right way in October," Capozzola stated. (Reporting and editing by David Gregorio in New York, with Shariq Khan reporting from New York)

(source: Reuters)