A week in the bio business feels like a month these days. CO2 pipeline cancelled in South Dakota with lawmakers banning the use of eminent domain for carbon dioxide pipelines, while the EPA has shifted terminology from SAF to Synthetic Aviation Fuel. The soybean oil chart continues to look concerning with CBOT May soyoil futures at 43.28 cents per lb, showing only modest gains despite broader market recovery. With soybeans hovering around $10.27 and corn at $4.50, farmer planting intentions appear to favor more corn acreage, yet the CO2 pipeline setback signals wavering support for the ethanol industry from the US government, particularly as US data shows ethanol production capacity remained relatively flat at 18.31 billion gallons in December 2024.
Bean oil-palm oil spread has plunged again to -$30 for May futures as palm oil prices have rallied significantly, reaching 4,627 ringgit ($1,043) per tonne on Friday - a 3.28% single-day increase. We've witnessed a dramatic shift from +$115/mt to -$30/mt since January 15, dipping below levels last seen in October 2024. The Malaysian Palm Oil Association reported February production down 10.3% from January, contributing to supply concerns that are fueling the palm rally. Meanwhile, biodiesel blend rates in Germany reached a historic low of 3.9% in November 2024, the lowest since the blending obligation began in 2009, with UFOP expecting total consumption of biodiesel and HVO to fall to around 2.20 million tonnes in 2024 compared to 2.62 million tonnes in the previous year.
Soybean oil's technical picture turned almost negative again despite US soyoil exports hitting a 15-year high from October through January. The forecast for good weather in Argentina (with February rains above recent averages and March already receiving half the month's average rainfall in the first five days) coincides with Brazil's harvest passing the 50% mark nationwide, with Mato Grosso state exceeding 80% completion. Brazilian soybean exports are in full swing, increasing by 21% to 4.12 million tons in early March, with monthly projections reaching 14.80 million tons compared to 13.55 million last year.
Trade in Amsterdam-Rotterdam-Antwerp (ARAG) for biofuels remained very quiet with FAME 0°C (F0) trading at $1,223/mt and rapeseed methyl ester (RME) at $1,298/mt, maintaining premiums +625 over ICE gasoil well above month average. Rapeseed oil prices in European ports increased slightly to €1,039-1,040 per tonne FOB Rotterdam which had little impact on favorable gross margins. The European Biodiesel Board has published an ambitious proposal to revise sustainability verification rules under the Renewable Energy Directive, calling for systematic on-site audits for non-EU producers and stricter sanctions for non-compliance to address concerns about fraudulent biofuel imports from South-East Asia.
The gasoil picture looks increasingly bearish as backwardation dropped more than a full standard deviation on Friday, potentially indicating significant news on the horizon. Could it be a cease-fire for Ukraine agreed in Riyadh? Meanwhile, Indonesia is preparing in vain to expand its biodiesel production capacity by 4 million kilolitres to meet demand for its upcoming B50 mandate (50% palm oil blend) planned for next year while BOGO exceeds $300/mt and that is before production costs. Singapore has increased biofuel blend limits for licensed bunker ships to B30 but that will affect mostly UCOME demand. Global vegetable oil trade patterns continue to shift amid US tariff tensions, with pressure easing slightly after President Trump temporarily exempted Mexican goods from steep tariffs. Let us see and fasten our seatbelts.
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