A ‘grand challenge’ launched by Joe Biden’s government in late 2021 is intended to encourage production of 3 billion gallons of SAF by 2030, and then increasing production tenfold to 35 billion gallons over the next two decades.

However, the research suggests that the country only has feedstock capacity to produce 21.7 billion gallons of theoretical SAF production, but only 12.2 billion gallons would come from biomass sources deemed to be sustainable.

The report defined sustainable biomass as any feedstock “without adverse market and environmental consequences.”

Examining the 2030 target of 3 billion gallons through four low-risk to high-risk feedstock and technology scenarios, the report determined that under all four scenarios the target was feasible.

At the lowest risk end – where technology already exists and supply is already being produced – ICCT estimated that production is likely to reach just over 3 billion gallons by 2030.

Around 40% of that output would reflect waste-based hydroprocessed esters and fatty acids (HEFA) with the balance coming from second-generation cellulosic production that typically uses non-food parts of plants or municipal city waste.

A high-risk production scenario, using waste and crop-based HEFA, second generation cellulosic fuels and conventional alcohol-to-jet (AtJ) technologies could see production ramp up to just short of 7 billion gallons by 2030, according to the report.

However, the dramatic ramp up in mandates to 35 billion gallons would likely be out of the reach of all forms of US feedstocks and would fall significantly short of target when non-sustainable feedstocks are exclusively deployed.

“In total, we find that the United States has approximately 21.7 billion gallons of theoretical SAF production from available biomass, but only 12.2 billion gallons of that is from sustainably available biomass,” the report said.

The report also noted that the current tax incentives, also introduced by the Biden administration to encourage investment in SAF production, only run out to 2027.

“Without a long-term price signal, SAF developers will lack sufficient incentive to invest in projects from less-tested, advanced fuel pathways,” the report warned, concluding that technology delays will likely blunt early production potential.

Pathways reliant upon HEFA production – an advanced form of renewable diesel – will be highly resource constrained, while AtJ pathways are likely to be expensively prohibitive in the near term.

Available resources and sustainability

In feedstock terms, the two biggest available resources – corn grain and soybean oil – will both largely fall short of the threshold required to be deemed sustainable, with both failing to meet the 50% life cycle GHG reductions that are required under the main compliance scheme, CORSIA.

When pushing on from the 2030 target, the report calculated the biggest single contributor to the SAF production pool stood to be corn grain ethanol, with 43.9 million tonneds of feedstock likely to be able to deliver around 6.9 billion gallons of SAF, at a conversion factor of just under 50%.

However, that would equate to virtually the entire supply of US corn ethanol currently heading into the road fuel mix, while the second place feedstock – soy oil – likely to be able to contribute a maximum 15.3 million tonnes at a 100% crush rate

That would yield 2.67 billion gallons of SAF, but both would find it difficult to contribute under current GHG reduction compliance requirements.

Of the feedstocks that are deemed to be sustainable, agricultural residues could contribute 161.1 million tonnes of feedstock and 4.88 billion gallons of SAF, while next best option was energy crops, that could produce 2.72 billion gallons of SAF from 89.7 million tonnes of feedstock.

Animal fats were identified as the most productive feedstock, with 500,000 tonnes of feedstock resulting in 420 million gallons of SAF, followed by corn oil where 700,000 tonnes of feedstock could produce 370 million gallons.

“Approaching the long-term SAF target would require substantial diversion of feedstock from other economic sectors,” the report notes, and called for incentives to be “extended and expanded” post-2030.

“There is insufficient biomass to meet the long-term 2050 target… the current set of policies in place are insufficient to expand SAF deployment beyond 3 billion gallons,” the ICCT said.

The report tap into the mounting concerns around the ambitious SAF mandates that both the US and the European Union have set out as they attempt to decarbonise the hard-to-abate aviation section.

With other parts of the world also looking at their waste-based and vegetable oil feedstock slate, and competition for feedstocks intensifying, meeting these targets will require significant investment and securing of relevant feedstocks.

The EU is looking to ensure 70% of its entire aviation supply uses SAF by 2050, up from 0.03% as of 2020.

View our feedstock prices

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The USDA, in its Biofuels Annual Report, published on September 1, claims that Neste received virgin palm oil volumes from Indonesia, which it said were exported fraudulently as UCO via China.

Neste’s reaction

“Neste’s recent analyses of UCO received from China do not support the USDA’s assertions, hence the company believes that the reference to Neste in the USDA report is either a mistake or based on a misunderstanding,” Neste said in a statement on Friday, adding that the claims were “unsubstantiated.”

The biofuels producer added that it takes suspected fraud cases “seriously and investigates them accordingly.”

“In addition, the company continuously evaluates the quality and authenticity of the raw material volumes it receives, conducting thorough laboratory analyses of the samples of UCO volumes it receives to its terminals from China,” Neste said.

The producer said it would subsequently contact the appropriate authorities at the USDA to discuss and learn more about the assertions in the report.

UCO imports from China

The hit back from Neste comes several months after the European Commission said it was investigating a complaint from a member state about possible fraud relating to biofuel imports from China.

The Commission’s acknowledgment of the complaint and call for cooperation fully with the investigation follows the influx of Chinese-sourced waste-based biodiesel through the early part of this year that has swamped key European markets and was accused of harming domestic production of both waste-based and conventional biofuels – physical prices collapsed across the EU.

Trade sources in June told Fastmarkets Agriculture that domestic biodiesel production had “pumped up in China,” this year, splitting Chinese UCO flows between the export market and new domestic processing capacity.

A similar ramp-up in sophisticated renewable diesel (RD) capacity across the US means the country has been pulling more and more of China’s UCO flows in as a feedstock, cutting flows of the feedstock to the EU – but the US has limited use for the finished grade UCOME.

“The US doesn’t want it [UCOME], so half China’s UCO is heading to the US and the other half to Chinese production which is then being exported [as finished product],” the source said.

Neste meanwhile restarted RD production at the expanded part of its Singapore plant in early August.

The production line initially started up in April, increasing annual production capacity to 2.6 million tons (mt), of which up to 1 million mt was intended to be sustainable aviation fuel (SAF).

However, the facility was shut down in June due to unexpected equipment repairs, which the company said in July would affect RD and sustainable aviation fuel (SAF) sales volumes in the second half of 2023.

The post Neste challenges USDA’s UCO fraud claims appeared first on Fastmarkets.

The data, released August 9, shows 1.5 billion RTFCs had been issued up to early July, substantially above the 659 million tickets that had been revealed in the first provisional 2022 figures released a year earlier.

The total volume of renewable fuel supplied has jumped 73% to 1.97 billion liters, and RTFCs have already been issued against 925 million liters – more than double the 400 million liters at the same point of 2022.

However, the delivery of fuels that have earned development status – usually fuels derived from household wastes or comprised of hydrogen or synthetic biogases – came in at 2 million certificates issued, broadly the same figure as at the same stage of 2022.

The data shows the feedstock was end-of-life tires from Poland, Sweden and Turkey that delivered 460,000 liters of development petrol and 644,000 liters of development diesel.

That was overall a 41% increase compared with 385,000 liters of development diesel and 395,000 liters of development petrol delivered at the same point in 2022, using the same end-of-life tires feedstock augmented by Polish food waste.

Biofuel contribution and categorization

Conventional biofuels reported a much bigger increase in contribution, with fuels categorized as using a general feedstock – often known as non-crop in the industry – increasing 130% to 594 million liters, 99.5% of which was derived using a double counting feedstock.

For 2022, 100% of the feedstock supply was deemed to be double-counted, but increased mandates and sharper competition for prized double-counted feedstocks is likely to undo some of the progress made under the renewable transport fuel obligation (RTFO).

That compares with a 130% increase in general biofuels, rising to 594 million liters, and a 134% increase in crop-based biofuels to 330 million liters year-on-year.

Used cooking oil (UCO) was the biggest single feedstock, with the equivalent of 380 million liters of renewable diesel supplied, while corn was the second biggest contributor listed as 186.5 million liters of ethanol.

View our article on UCO supply and traceability

The 2023 compliance year raises the blend mandate to 14.22% of the total fuel supply, of which 3.5% of the total supply can be derived from crop-based feedstocks.

Of the balance, 1.15% should be development fuels, with the remaining 9.6% labeled as general biofuels – typically sourced from waste-based feedstocks.

Typically the UK government provides updates on biofuel outlooks on a quarterly basis.

The post First cut of UK 2023 data shows RTFC issue tripled year-on-year appeared first on Fastmarkets.

Learn more about our forecasts

In addition, revised forecasts calling for short-lived heat in the Midwest corn belt also weighed on the front end of the market. More favorable growing conditions due to the prospects of cooler temperatures and increased chances for precipitation next week come at a time when soybean crops in the region move toward their peak pod-setting phase.

Nearby delivery August soybean oil futures settled at 67.60 cents per pound on Friday, down 101 basis points per pound, or 1.47 percent. The September contract was down 18 basis points per pound at the closing bell. December soy oil futures finished the session at 62.40 cents per pound, up 33 basis points per pound.

Despite the afternoon sell-off, soybean oil contracts farther out along the forward curve ended with slight gains but still well below session highs, underpinned by stronger crude oil prices and worries of tighter global supply. Tensions were heightened in the Black Sea region this week following a volley of air strikes between Russia and Ukraine. Russia pulled out of the Black Sea Grain Initiative early last week.

In Malaysia, palm oil futures ended the session and the week lower, amid ongoing strength in the ringgit. Still, worries that supply from the Black Sea could be choked off kept losses contained. The most actively traded palm oil futures contract (October) closed down 20 ringgit per tonne, or 0.5 percent, on Friday, just above 4,000 ringgit per tonne at 4,006 ringgit per tonne. On the week, the contract was down 0.72 percent in value.

Miller’s data suggested that palm oil production could be marginally higher for the full month of July.

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The warning comes after the government last week published an official memorandum suggesting the cuts to Sweden’s biofuel mandate after pressure mounted from Swedish voters as the country’s largest Facebook group advocated for a reduction in fuel prices at national forecourts.

The proposal, first revealed in May by the right-wing Sweden Democrats-backed coalition government, states that the greenhouse gas reduction obligation will be reduced to the EU minimum of 6% for gasoline and diesel, where it will remain until 2026.

The reduction of 34 percentage points for diesel and a 6.5 percentage decrease for gasoline “is not cost-effective and the timing is wrong as new hydrotreated vegetable oil (HVO) capacity is coming on-stream this year and next in the order of millions of tonnes,” the director of Svebio’s BioDriv program Tomas Ekbom told Fastmarkets Agriculture.

Meeting the target, therefore, could potentially only be feasible by blending fatty acid methyl-ester (FAME) biodiesel – which is subject to a 7% blend wall – and there will be “very little room or need” for HVO – also known as renewable diesel, Ekbom said.

Fastmarkets understands that interest groups have until August 25 to respond to the government’s proposal.

After the Swedish Council on Legislation has processed the proposal, it will then go to the country’s Parliament for an official decision to be taken, with the legislation expected to come into effect on January 1, 2024.

“Because of Sweden’s arctic climate, we need a winter diesel quality and not all refineries in the world can produce it,” Ekbom said, adding that there could be a shortage of winter diesel in Sweden, “especially because the change would take place in such a short timeframe.”

Meanwhile, the potential reduction could also mean a reduction in forest harvesting to increase Sweden’s carbon capture volumes.

“The government anticipates a growth in transport electrification to reduce emissions,” Ekbom said, adding, however that if these measures are not sufficient to enable the country to reach its 2030 targets, Sweden might need to purchase carbon emissions rights within the European Union’s Emissions Trading System (ETS).

Consultancy Stratas Advisors last year estimated that a reduction in the GHG reduction mandate to 6% from the current 30.5% in biodiesel from 2024 onwards would slash demand for renewable diesel in Sweden by two-thirds, equivalent to 1.2 billion liters compared with 1.8 billion liters of demand based on the current requirement.

For more information on the current biofuel market, take a look at our dedicated page for biofuel prices.

The post Sweden slashes biofuels mandate to increase diesel demand by 1.5m tonnes per year appeared first on Fastmarkets.

The agency was working to confirm final figures ahead of a July 14 deadline, but the decision has now been pushed to July 21, according to a statement issued on Tuesday by ethanol lobby Growth Energy.

Industry reaction has focused on what they see as an imbalance between biomass-based diesel proposals and the ramp-up in renewable diesel production capacity across the US.

A key assumption is also coming from the news – first reported by Reuters – that a proposal to roll electric vehicles into the biofuel blending program will be dropped, and with it, the loss of potentially billions of credits that the commentators have dubbed eRINs.

The so-called eRINS may only temporarily be dropped, however, while the EPA deals with complaints over their legality, although no real time frame exists for their possible return, and Fastmarkets Agriculture understands it could take an act of Congress to have them properly installed into the RVO, which is likely to be no earlier than 2025 or 2030.

While this has maybe raised hopes that an increase to the biomass-based diesel or the advanced biofuel categories could be on the cards, with the initially proposed volumes revealed back in December 2022 dividing the market, experts previously told Fastmarkets that the removal of eRINs does not actually open the door for additional biomass-based diesel volumes.

Industry groups focusing on ethanol welcomed the proposed volumes, while biomass-based diesel groups were dismayed at the relatively modest proposals.

Detail

Typically, EPA reveals its thinking ahead of a final deadline in a call for feedback, and the agency proposed the following figures for the 2023, 2024, and 2025 years:

The bedrock of the total figures is a 15 billion gallon conventional biofuel allowance for 2023, topped up with a 250 million gallon additional award, following an earlier court case.

From 2024 and 2025, that additional allowance is rolled into a 15.25 billion gallon baseline that is typically filled by corn-based ethanol.

However, the relatively modest figures for biomass-based diesel of 2.82 billion gallons rising to 2.95 billion gallons in 2025 has caused angst, with industry bodies, senators and members of Congress from big agriculture states writing to the EPA’s administrator government to raise the volumes.

Their argument has been rooted in the increase in production capacity – both current and still expected – which they argue has not been taken fully into account.

“Projections from the Energy Information Administration (EIA) anticipate renewable diesel capacity doubling to 5.9 billion gallons by the end of 2025,” a letter signed by 37 members of Congress and addressed to EPA administrator Michael Regan.

“EPA’s proposed blending targets for biomass-based diesel account for less than 10 percent of the volume increases estimated by EIA, reaching only 2.95 billion gallons in the final year.

Industry reaction

Trade sources spoken to by Fastmarkets expect some modest movement on the advanced biofuel category – which would include renewable diesel or sustainable aviation fuel volumes, the crux of the upcoming expansion – but there is a wide range of estimates.

Prices for refined, bleached, and deodorized (RBD) soybean oil in Illinois – a major feedstock into the production process – have already responded to the potential for an increased mandate, with cash prices published by Fastmarkets service showing a steady increase since May 31.

RBD soybean oil prices in central Illinois are up more than 10 cents, or about 17 percent, since the end of May to the highest level in three months, above 70 cents per pound, according to Fastmarkets’ data.

RBD soybean oil is a preferred feedstock for many US producers, particularly ones that do not have pre-treatment on-site at their renewable diesel (RD) facilities.

Rising demand from both the food and fuels sectors has led to tight interior supply, with capacity generally sold out through the third quarter of this year.

A decision by the EPA to raise the RVO targets would require more soybean oil for domestic use.

The EPA is expected to confirm the 2023, 2024, and 2025 volumes by July 14, although speculation is mounting that the decision may be pushed back to next week.

The post EV withdrawal from RVO package raises hopes for biodiesel lift appeared first on Fastmarkets.

Speaking during a panel session at the Fastmarkets Biofuels and Feedstocks Americas conference on Tuesday May 16, Clean Fuels Alliance America (CFAA) public affairs and federal communications director Paul Winters told delegates that priorities for the US administration “are about electrifying this or that,” while there is “no consideration for the role that renewable fuels can play.”

Last year, proposals to include biogas for renewable electricity supplied to electric vehicles in the US Renewable Fuel Standard (RFS) received opposition from refiners, who would be obliged to buy compliance credits from carmakers that will ultimately earn the credits.

“There is a lot of lip service to our industry, however, with Administrator Regan reiterating in Congress that our industry should have a seat at the table,” Winters said, adding that, despite Regan noting he had met with industry groups over the RFS rule, CFAA “is still waiting for that meeting two years later.”

RFS woes

In December 2022, the US Environmental Protection Agency (EPA) proposed to increase biofuel blending volume requirements for the next three years under the RFS, as well as proposing changes, including making refiners buy newly classified “e-RINs” from makers of electric cars — vehicles that are viewed by the oil industry as an existential threat.

The agency called for an overall blending mandate of 20.82 billion gallons in 2023, 21.87 billion gallons in 2024 and 22.68 billion gallons in 2025, and is expected to publish its final rule for 2023 RVOs by June 14, although conference delegates told Fastmarkets Agriculture that delays “wouldn’t be surprising.”

“I wish they would raise the top number,” Michael McAdams, from the Advanced Biofuels Association, told the audience in Chicago.

“But I am less than 50% [sure] they will go there,” he added.

Renewable diesel capacity

Fastmarkets Agriculture sees renewable diesel (RD) capacity at approximately 2.4 billion gallons at the end of 2022, surpassing the biodiesel industry for the first time.

Not only has RD just moved beyond biodiesel in terms of market size, but it is also expected to more than double by the end of 2024.

The doubling of RD capacity is going to increase feedstock demand proportionately. Vegetable oils, including distillers’ corn oil (DCO), will continue to face strong demand.

Still, there are potential headwinds for several new RD projects due to current economic factors, with Canadian-based Parkland Corp in March canceling plans to build an RD plant at its Burnaby refinery in British Columbia due to rising feedstock costs and uncertainty surrounding renewable fuel tax credits in the US for non-domestic producers.

“You are seeing a rationalization now to Parkland,” Trent Weatherly, from Montana Renewables, said during the conference. Montana Renewables recently began producing RD in Great Falls, Montana.

“Refinery margins [which have improved] since the second quarter of last year are also going to influence this,” Ash Creek Renewables president John Cusick said, regarding whether companies will proceed with plans to build RD plants.

Feedstock supply

Panelists had mixed views on feedstock supply for the biofuel industry, with some remaining confident that supply issues in the US were subsiding, while others warned this could be only temporary.

“The market is awash with feedstock in a way, but we also see big projects coming online — some are a bit delayed or not being commissioned as quickly as envisioned, so there’s definitely some false sense of security in the market,” Cusick said.

However, Winters pointed to growing domestic soybean crushing capacity in echoing sentiments expressed earlier in the day by the American Soybean Association, adding that the US plans to stop exporting so much of its soybean crop.

“There are also other crops being discussed, like canola, for winter rotations in southern states,” Winters said, referencing a new joint project between Chevron, Bunge and Coretva that was announced on May 16.

State-led low-carbon efforts

Meanwhile, panelists told the conference that a handful of states could potentially follow the lead of California by implementing low-carbon emissions programs in the coming years.

According to Cusick, New York, or any other state in the northeastern US, could be the next to move in a low-carbon direction.

Cheryl Laskowski, from the California Air Resources Board, earlier pointed to New Mexico as a possibility as the next state in the western US to implement such a program.

Earlier this year, Washington state said it would reduce the carbon intensity of its transportation fuels to 20% below 2017 levels by 2038, and quite possibly by 2034.

The post US industry calls for government to boost renewable fuels support appeared first on Fastmarkets.

Biodiesel imports during March reached a record-setting 44.2 million gallons. March imports were 19 percent above February and 39 percent over the 31.7 million gallons imported during March 2022; an increase of 123 percent over the prior five-year average of 19.8 million gallons.

Imports arrived from ten countries, with 86% of the volume coming from Germany, Canada, Spain and Brazil. 2023 Biodiesel imports are averaging more than 40 million gallons per month, which is noticeably above the 2022 monthly average of 19.7 million gallons.

The EPA’s 2023 proposed renewable volume obligation (RVO) for biomass-based diesel increased to 2.82 billion gallons, up from 2.76 billion in 2022. The larger RVO may be less than the market was hoping to see but provides additional opportunities for biodiesel-exporting countries. There is optimism the final RVO will be higher, given that the current domestic capacity already exceeds the proposed 2025 mandate, with significant additional supply expected to come online over the next two years.

Renewable diesel imports

The US Census Bureau does not report renewable diesel (RD) imports directly, but the Energy Information Administration (EIA) does. EIA reporting lags that of the US Census Bureau. February RD imports of 22.9 million gallons were 14 percent below January’s import total but 52 percent over the 15.1 million gallons received in February 2022.

Renewable diesel imports may increase as additional foreign capacity comes online, especially following Neste’s Singapore expansion.

Biodiesel imports account for 4.3 percent of the 2023 D4 mandate and are running at over twice the pace seen in 2022. During the first three months of 2022, only two percent of the mandate was covered by imports, suggesting that imports will be battling domestic production to a stronger degree in 2023.

Adding renewable diesel imports to the total lifts the import percentage total to 6.1 percent of the mandate. Biodiesel and renewable diesel imports accounted for 20 percent of the 2020 mandate, 21.5 percent of the 2021 mandate, and 18 percent of the 2022 mandate. Due to the increased size of the 2023 mandate and strong import activity over the first three months, imports could climb back towards 22 percent of the mandate, or higher, in 2023.

Biodiesel exports

US biodiesel exports are also off to a strong start, although not at a record level. There were 20.6 million gallons of biodiesel exported during the first quarter of 2023, making it the third-strongest Q1 on record. Q1 exports were four percent below Q1 of 2022, and 13 percent under the record of 23.6 million gallons reached in Q1 of 2021.

Biodiesel exports continued to build in March, reaching a three-month high of 11.1 million gallons. This was 98 percent above the 5.6 million gallons exported in February and 26 percent over the 8.8 million gallons exported during March 2022. Additionally, March exports were 18 percent above the prior five-year average and the second highest on record for the month of March, falling just below the 2021 record of 11.4 million gallons.

The post Biodiesel imports and exports grow in March appeared first on Fastmarkets.

The weekly average soybean oil price fell 1.7 percent for RBD and 2.2 percent for crude degummed soybean oil (CDSO). RBD pricing is 1.7 percent below month-ago levels, while CDSO is 3.3 percent lower. Biodiesel prices are down 4.6 percent from a month ago.

The price spread between RBD soybean oil and crude degummed soybean oil edged fractionally higher last week. The RBD average weekly price declined 1.1 cents per pound to 66.40, while the average CDSO’s price fell 1.2 cents to 56.30 cents per pound in Central IL.

How the spread trends

RBD currently carries a 10.1 cents per pound premium to CDSO, and the spread is at a 13-week high. The RBD-CDSO spread continues to trade in a narrow range with an upper limit of 11 cents vs a lower limit of 8.2 cents and remains in a downward trend since June 2022.

Prior to April 2021, the RBD soybean oil premium to crude degummed averaged approximately three cents per pound. Increasing renewable diesel capacity lifted demand for RBD soybean oil relative to crude-degummed, causing RBD supply concerns due to limited crushing capacity. This enabled the RBD-CDSO spread to widen. The spread has been as high as 25 cents but narrowed in recent months following a projected increase in refining capacity and the EPA setting RVOs lower than the market anticipated.

Reports from the Energy Information Administration show renewable diesel producers have been using more soybean oil as feedstock lately and RBD soybean oil is a preferred feedstock for many producers.

Glycerin, a co-product of biodiesel production, had spot prices quickly dropped several weeks ago and values continue to hold in the lower range. There remains a certain amount of volatility within the glycerin market, but an oversupplied situation is keeping pricing in check. Natural gas prices and methanol held steady this week.

Biodiesel revenue was unchanged at $5.523 per gallon, while variable costs for RBD soybean oil users fell 1.5 percent from $5.52 to $5.43 per gallon. The margin over variable cost for RBD soybean oil improved from one cent per gallon to nine cents.

Variable costs include a 25 cents per gallon estimate for “other variables” beyond soybean oil, natural gas, and methanol. Total costs include an assumption of 35 cents a gallon, which may not pertain to all facilities; actual costs could be significantly lower.

Variable costs for CDSO users dropped 1.9 percent from $4.78 to $4.68 per gallon. With revenue holding steady and costs moving lower, the CDSO margins over variable and fixed costs improved. The margin above variable cost and total cost declined 12 percent and 23 percent from the margin indication the week before.

EPA monthly consumption data shows that domestic biodiesel and renewable diesel production has fallen 21 percent and six percent, respectively, from December. The possibility of RVOs being revised higher could provide additional demand if the EPA decides to increase mandates from the proposed levels, as some participants believe might happen. EPA March consumption data will be released later this week.

Volatility is likely to remain within the soybean oil market due to additional demand projections from renewable diesel producers. Renewable diesel demand is forecast to more than double over the next two years. Geo-political tensions continue to impact commodity market volatility in general.

The post RBD soybean oil trading on 10-cent premium to crude degummed appeared first on Fastmarkets.

The price spread between RBD soybean oil and crude degummed soybean oil (CDSO) narrowed, with RBD pricing falling 1.8 cents per pound to 71.642 for the week, compared to CDSO’s average price slipping 1.4 cents to 62.742 cents per pound in Central IL. Feedstock cost fell more rapidly than biodiesel prices allowing the weekly production margin to improve. Glycerin, a co-product of biodiesel production, had prices edge fractionally higher. Natural gas prices, reported in arrears by the Energy Information Administration (EIA), also moved higher, while the cost of methanol held steady.

Biodiesel margins over soy oil variable cost

Biodiesel revenue of $5.91 per gallon was mostly unchanged from the week prior, showing a 0.4 percent decline, while variable costs for RBD soybean oil users fell 2.4 percent to $5.81 per gallon. The margin over variable cost for RBD soybean oil improved from negative one cent per gallon to nine cents.

Variable costs include a 25 cents per gallon estimate for “other variables” beyond soybean oil, natural gas, and methanol. Total costs include an assumption of 35 cents a gallon, which may not pertain to all facilities; actual costs could be significantly lower.

Variable cost for CDSO users fell two percent to $5.15 per gallon, exceeding the 0.4 percent decline in biodiesel revenue, allowing margins to push higher. The margin above variable cost and total cost for crude degummed soybean oil users was 12 percent and 25 percent over the margin indication from the week before.

Biodiesel prices have been trending lower, but improved weather and the possibility of stronger RVOs could swing momentum. Less feedstock demand from the renewable diesel sector has helped to keep feedstock values lower than expected.

The premium being paid for RBD soybean oil relative to crude degummed fell nearly four percent last week to 8.9 cents per pound. The spread between RBD and CDSO has remained in a downward trend since last June.

Prior to April 2021, RBD soybean oil averaged a price premium to crude-gummed soybean oil of nearly three cents per pound. Increasing renewable diesel capacity has lifted demand for RBD soybean oil relative to crude-degummed due to limited crushing capacity. This enabled the RBD/CDSO spread to widen. The spread has been as high as 25 cents but narrowed in recent months following a projected increase in refining capacity and several renewable diesel projects either delaying or placing production plans on hold.

Volatility is likely to remain within the soybean oil market due to additional demand projections from renewable diesel producers. Renewable diesel demand is forecast to more than double over the next two years. Geo-political tensions continue to impact commodity market volatility in general.

The post Biodiesel margins improve while feedstock prices remain under pressure appeared first on Fastmarkets.