Biodiesel Credit Backdrop Weakens—BOPO Collapses as D4 RINs Slide

In the U.S., soybean oil finally broke lower with BOPO dropping nearly 25% to +44 $/mt, down almost 80% over the last three months. This marks the long-anticipated correction as harvest pressure collides with export bottlenecks. Roughly 90,000 soybean-oil call options expire within the next 31 days, most between 53 ¢/lb and 63 ¢/lb strikes, now largely out of the money. With no USDA harvest report due to the shutdown, private estimates suggest soybean harvest is already near 70% complete, possibly higher. River logistics remain at crisis levels—barge drafts restricted to 9′6″, narrower tows, and ongoing dredging delays continue to elevate freight costs and depress interior basis. Grain and oilseed flows to the Gulf remain severely curtailed, adding to domestic carry and dragging soybean oil lower despite steady crush margins.

The forward curve is now flashing storage stress. The Dec/March soybean-oil spread widened another 4% today to –0.82 ¢/lb, while the Dec/May spread reached –1.08 ¢/lb, a 6% move on the day. This steepening contango reflects both logistical gridlock and a lack of export pull, as oil remains trapped inland. Cash soybean futures are about 5% above last year at $10.20/bu, yet the physical market tells a softer story. Domestic crushers maintain positive margins, but weak offtake and constrained logistics limit forward sales. The absence of Chinese demand is clearly visible in Gulf premiums, which have fallen below replacement parity, reflecting the market’s inability to clear surplus stocks.

D4 RINs softened again, slipping to around $1.06/gal—down roughly 3% on the day—as traders price in muted compliance demand and stalled policy momentum. With the government shutdown now entering its fourth week and no sign of legislative progress, EPA rule-making and reporting remain on hold. Predictive markets such as Kalshi and Polymarket now price roughly two-thirds probability that the shutdown will end between November 12 and 17, implying another three to four weeks of delay. Even if resolved before Thanksgiving, the regulatory backlog will likely push RVO and related guidance updates into December, keeping biodiesel credit sentiment capped.

In South America, trade remains subdued, with limited liquidity and buyers largely absent except for nearby replacements. Premiums for new-crop (April/May) soybean oil are quoted near –400 under futures, reflecting discounted forward offers rather than active selling. Sellers are trimming bids to stimulate demand, but trade remains thin. Despite strong crop prospects, replacement margins are tight as domestic costs rise and flat prices hover below $1,100/t. Brazilian and Argentine FOB offers still undercut U.S. Gulf levels by roughly $60–70/t for December–January shipment, keeping U.S. oil uncompetitive in Asia. Brazil exported about 8.2 million t of soybeans in September, while Argentina—after a government-driven liquidation under its “soy-dollar” scheme—has shipped an additional 6–7 million t since August. Together, these flows have effectively filled China’s soybean import requirements through Q1, leaving little room for U.S. participation.

In Europe, trading was quiet as many participants attended the London biofuels conference. FAME 0 softened to about $1,312/t fob ARA, while RME firmed to $1,392/t, widening the RME/FAME spread to $80/t. UCOME held near $1,493/t, while HVO Class II jumped $71/t to $2,678/t, maintaining its premium to gasoil near $2,000/t. The Rhine remains fully navigable, but the supply outlook is turning heavier. Europe is expected to import around 7 million t of rapeseed and canola between October and January—about 1 million t less than last year but offset by a larger EU crop of 20 million t, 3 million above 2024. With crushers well covered, this will likely cap RSO values and pressure biodiesel margins into winter.

In Asia, China’s soybean import program has shifted decisively southward. Having already secured roughly 74 million t through September—including 59 million t from Brazil and an unusually large volume from Argentina—China is now fully covered until new-crop South American supplies become available in March or April. The surge in Argentine shipments following export incentives provided a crucial buffer, further reducing China’s reliance on U.S. Gulf shipments. As a result, U.S. soybean exports are running at their slowest October pace since 2019. This confirms a structural trade pivot: China’s import calendar is now aligned with Brazil’s and Argentina’s export cycles, sidelining U.S. supplies during what used to be their prime export window.

Across regions, the message is consistent—soybean oil and biodiesel credits are both retreating under the weight of rising inventories, widening forward carries, and prolonged policy paralysis in Washington. With BOPO collapsing, BOGO softening, and POGO steady, the market remains feedstock-driven rather than energy-led. Unless export flows recover and the shutdown ends soon, biodiesel sentiment may stay defensive well into November.