Biodiesel Demand Absorbs Record NOPA Crush as Soyoil Curve Inverts

The soyoil market is sending a strong forward signal and it is supported by hard data. NOPA reported March crush at 226.161 million bushels, up 16 percent year on year and the second highest monthly figure on record. At the same time, soyoil stocks came in at 2.039 billion pounds, below the average trade estimate of 2.173 billion. The curve has reacted accordingly. May July is now +0.31 cents per pound while July December has expanded to +4.72 cents per pound, equivalent to roughly $100 per metric ton. This structure reflects a clear incentive to pull supply forward and signals tightening availability into the second half of the year.

At the same time, basis levels in Brazil are moving in the opposite direction. FOB Paranaguá soyoil is now trading around -1.25 to -1.62 cents per pound versus CBOT, which converts to approximately -28 to -36 dollars per metric ton. This reflects continued pressure at origin, driven by strong Brazilian crush and slower export pull. The divergence is notable. The US futures curve is pricing scarcity while Brazilian physical markets are discounting to clear supply.

Part of that pressure is linked to China demand. China imported only 4.02 million metric tons of soybeans in March versus a more typical 6 million. This is a shortfall of roughly 2 million tons in a single month. While expectations are for imports above 10 million tons per month from April to June, the March data shows that demand has been delayed. That delay contributes directly to the build in exportable supply in Brazil and helps explain the weak FOB basis.

This disconnect highlights the role of US policy and biodiesel economics. D4 RINs are trading near 1.80 dollars per gallon while front end biodiesel screen margins are around 1.02 dollars per gallon for May. That level of margin continues to support strong domestic demand for soyoil. The backwardation in the curve confirms that demand is concentrated in the prompt, but RIN pricing does not yet reflect a system that needs to ration feedstock deeper into the year.

Energy markets are reinforcing the tightening narrative. Global crude inventories have declined by 41 million barrels in April, implying a draw rate of 2.7 million barrels per day. Asia is leading the contraction with regional stock declines ranging from 17 percent to 25 percent. Front WTI is trading at 92.33 dollars per barrel and Brent at 95.01, with strong time spreads such as WTI May June at +6.69 dollars. This confirms that physical balances remain tight even as flat price moves on headlines.

Logistics constraints continue to distort flows. Only 13 ships have transited the Strait of Hormuz since April 14, with 7 inbound and 6 outbound. At least 8 of these are either sanctioned or linked to Iran trade. The lack of participation from mainstream operators reflects elevated risk and restricts normal flows of crude and products. This supports distillate markets and helps maintain backwardation across diesel and gasoil.

In vegoils, price action has softened but underlying balances remain firm. June palm oil closed near 4,468 ringgit per ton, or about 1,131 dollars per metric ton, down 1.9 percent on the day. Cash markets for palm and soyoil declined by 25 to 35 dollars per metric ton. Despite this, inventories continue to draw. China’s combined vegoil stocks are estimated at 1.92 million tons, with soybean oil down 10,000 tons and palm oil down 30,000 tons on the week. This indicates that consumption continues to absorb supply even as prices correct.

Policy developments continue to add structural demand. Malaysia is moving from B10 toward B15 biodiesel blending, starting with B12. Indonesia is advancing plans to expand refining capacity for sustainable aviation fuel using palm oil and used cooking oil. With aviation fuel stocks at 388,600 kiloliters and daily consumption at 13,800 kiloliters, the country holds roughly 28 days of coverage and is actively seeking to reduce import dependence.

European market behavior shows a different tone. Paper hedging activity has dropped sharply, falling from levels above 700 thousand tons in week 12 to around 150 thousand tons in week 15. While Easter holidays contribute to the slowdown, the magnitude suggests broader caution among participants. This is a market that is stepping back rather than extending risk.

Physical activity in the NWE barge market remains firm despite the drop in paper. Recent window indications show RME trading around 1,350 to 1,380 dollars per metric ton flat price, FAME 0 around 1,300 to 1,330, and UCOME maintaining levels above 1,450 depending on specification and timing. These values remain aligned with ICE gasoil strength and confirm that prompt demand has not weakened.

The overall structure across markets is internally inconsistent. Soyoil backwardation at +4.72 cents per pound, crude inventory draws of 2.7 million barrels per day, and declining vegoil stocks all point to tightening physical balances. At the same time, FOB Paranaguá basis at -1.25 to -1.62 cents per pound, reduced European hedging activity, and weak China imports in March indicate localized oversupply and demand timing risk. The US market is pricing scarcity (RFS Island effect) while Brazil is pricing global surplus. This gap will need to close either through a rebound in China buying that absorbs Brazilian supply or through a repricing of US flat price and renewable credits.