US Considers Tariff Hike on China’s Used Cooking Oil Amid Soybean Industry Concerns

The Biden administration is set to announce a new wave of tariffs on Chinese goods, including electric vehicles, as early as next week, according to Bloomberg reports. Speculation has spread in the market that imports of used cooking oil from China could also be included in the tariff list, causing soybean oil futures to surge by the most since July. The US market has been flooded with supplies of Chinese used cooking oil in recent months, which is used to make biofuel, eroding profits for agriculture processing companies that crush soybeans.

Soybean Industry Pushes for Higher Tariffs

The National Oilseed Processors Association (Nopa), which represents the biggest US soybean processors, including Cargill, Bunge Global, and Archer-Daniels-Midland, is pushing for higher levies on Chinese used cooking oil imports. The group wants the tariffs to be higher than the current 15.5% rate, arguing that the higher levies would level the playing field with other clean energy sources, such as electric vehicles and solar.

Soybean crushers are concerned that the flood of used cooking oil imports from China is weakening demand for US crop-based ingredients used to make renewable diesel and sustainable aviation fuel. There are also unconfirmed speculations that the used oil from Asia may not be authentic and could be mixed with fresh vegetable oils, such as palm, potentially distorting commodity values and undermining US biofuel laws.

Market Reactions to Tariff Speculations

Soybean oil futures settled 4.2% higher on Friday, after climbing as much as 5% intraday, far outpacing gains in the larger market for whole soybeans, which settled 0.9% higher. The rise in soybean oil futures is attributed to traders betting that Chinese used cooking oil may be included on the list of tariffs expected to be announced by the US.

Susan Stroud, a grain analyst for No Bull Ag in St Louis, said on Friday, “Rumors abound that we may soon see levies against imported used cooking oil. Soybean oil is hanging on to any glimmer of hope we can to slow the flow of cheap, less-carbon-intensive feedstock imports.”

Concerns Over Authenticity of Chinese Used Cooking Oil

Soybean crushers have raised concerns about the authenticity of the used cooking oil being imported from China. There are widespread, unconfirmed speculations that the used oil from Asia may not be genuine and could be mixed with fresh vegetable oils, such as palm oil.

If these speculations prove to be true, it could potentially distort commodity values and undermine US biofuel laws. The US biofuel industry relies on authentic used cooking oil as a feedstock for the production of renewable diesel and sustainable aviation fuel. Any adulteration of the imported used cooking oil could have significant implications for the industry.

Awaiting Official Announcement

The full scope of the incoming tariffs, including rates and the total list of sectors that will be impacted, is not yet clear. The White House has declined to comment on the matter. Soybean oil values have been down so far this year, but futures in Chicago have seen an uptick in the last couple of trading days as commodities traders await tariff news.

Nopa chief executive officer Kailee Tkacz Buller said the memo was sent in response to rumours of possible additional tariffs being applied on used cooking oil. Nopa members support a boost on par with other clean energy sources, such as electric vehicles and solar, to level the playing field. The market remains vigilant as President Joe Biden is expected to unveil an increase in some tariffs first imposed under former president Donald Trump on Tuesday, May 14.