Harvest Insights: Navigating the U.S. Biodiesel Landscape

Current Crop Conditions and Market Dynamics

Harvest is now underway in the U.S. The USDA reports that 5% of soybeans have been cut across the top 18 growing states as of September 14. This is slightly ahead of the average progress. Crop conditions remain strong, with 63% rated as good-to-excellent. The weather outlook for the next two weeks suggests rapid advancement in harvesting. However, the real concern lies not in production but in demand.

Even the New York Times has begun to recognize that the current administration is preoccupied with debates over TikTok and negotiations with the UK—a relatively small trading partner. Meanwhile, American farmers are facing a record crop with virtually no new sales to China. This situation raises significant concerns about the future of U.S. agriculture and biodiesel production.

Global Competition: The Brazilian Advantage

Brazil has already shipped approximately 106.6–107 million tons of soybeans this year. This means that China is essentially covered through the end of the year. At the same time, soy oil has become the margin anchor for Brazilian crushers, with the domestic biodiesel mandate currently set at B15. These blend levels are absorbing large volumes of vegetable oil, but it is important to note that it is not all soy. Tallow also plays a crucial role in Brazil’s biodiesel pool.

Back-of-the-curve Paranaguá soy oil premiums remain weak. This indicates that the market is already discounting any potential increase, suggesting that soy oil may not be as bullish as headline numbers might imply. For U.S. exporters, this means competing not only with Brazil on raw beans but also against a structurally supported, diversified feedstock mix.

Shifting Trade Dynamics in Europe

Trade dynamics in Europe are changing rapidly. The EU has finalized a free trade agreement with Indonesia, with the signing scheduled for September 23. Simultaneously, Indonesia has won key points at the WTO against EU biodiesel duties and is now pressing Brussels to eliminate them. It bears repeating: palm-based biodiesel pathways can deliver over 70% GHG savings compared to the diesel comparator. When methane capture from POME is credited, reductions can approach ~80%. This is a significant point as Europe reevaluates access conditions.

Asian Diesel Markets and Regional Trends

In middle distillates, Asian diesel markets saw their first window deal in two weeks. Premiums have firmed as physical buying improved. However, the east-west diesel spread remains steeply negative at more than $40/mt, reflecting regional oversupply. Refining margins have slipped to $18.5/bbl, the lowest in nearly two weeks. The cash market has held firmer, with differentials in Singapore close to $1/bbl, even as backwardation steepened.

Indian refiners, such as Nayara, part-owned by Rosneft, are now facing pressure from sanctions risk. There are fears of potential secondary measures. Despite ongoing discussions about such sanctions, appetite in Europe appears limited, and in the U.S., it seems even less. This leaves the market in a state of ambiguity.

Biodiesel Pricing and Market Sentiment

ARAG has been active in the market. RME/F0 traded firmer at +€77/mt. FAME 0 printed +€669 over ICE gasoil, with a flat price near $1,381/mt. UCOME was around $1,487/mt. With gasoil climbing back above $715/mt, flat prices across biodiesel benchmarks are being pulled higher, even as premiums hold steady. Gross margins reflect the spread: ~+$168/mt for RME, +$101/mt for FAME, and ~+$272/mt for UCOME.

SAF continues to command a wide premium to HVO CL2, with the latest flats at ~$2,745/mt for SAF against ~$2,442/mt for HVO CL2. This spread of over $300/mt underscores how aviation mandates and tighter supply are driving structural demand strength in jet fuel relative to renewable diesel. Such high SAF prices in ARAG will almost certainly attract Asian barrels into Europe in Q4, adding another layer of competition to an already volatile premium stack.

U.S. Biodiesel Sentiment: Challenges Ahead

In the U.S., biodiesel sentiment remains fragile. D4 RINs, which had been steady, suddenly turned lower today. December ’25 contracts slipped back toward $1.05, while December ’26 only modestly firmed at $1.13. This shift reflects growing market frustration and a loss of confidence in Washington’s handling of the RFS. The EPA has confirmed a 50% haircut on foreign producers' RINs, which has further complicated the landscape.

With the EPA’s recent SRE reallocations already watering down obligations, traders fear that the political process is eroding incentives for blending. This leaves biodiesel producers squeezed by weak margins and uncertain demand signals.

Conclusion: Navigating the Future of Biodiesel

As we move forward, the biodiesel industry faces significant challenges. The interplay of global competition, shifting trade dynamics, and domestic policy will shape the landscape for years to come. It’s crucial for industry professionals to stay informed and adapt to these changes. By understanding the complexities of the market, we can better navigate the future of biodiesel and renewable diesel.

For more insights and strategic advice in the biodiesel and renewable diesel industry, visit Globalbiodiesel LLC.