Biodiesel Manages Downside in a Weak Energy Tape: Producers sell RME, buy HVO, and lean on policy-backed rapeseed, canola, and SAF demand

Energy is marginally weaker today, but the pressure remains squarely on vegetable oils, with soyoil again the weakest leg of the complex. Front-end structure continues to deteriorate: the Jan/Jul soyoil carry has widened to –1.34 while Jul/Dec has narrowed to around +0.45, a clear signal that near-term surplus is being priced more aggressively while the back end stabilizes. BOPO echoed that softness, sliding nearly 10% on the day to around +98.6 for March, confirming that veg oils are underperforming palm ( a proxy for waste oils) even without a collapse in outright energy.

BOPO

Physical markets continue to absorb some of that weakness. FOB Paranaguá bids for soyoil firmed slightly again around –400, highlighting that the adjustment remains largely a futures-led phenomenon rather than a breakdown in export demand. Futures are doing the clearing work, while origin values remain anchored by logistics and nearby buying interest.

Soybean flows into China add important context. Recent imports near 3 million tonnes are broadly in line with expectations, but the more telling signal sits outside China. Non-China sales are running materially below last year, weekly U.S. export activity has slowed, and cash markets are increasingly chasing demand. That backdrop reinforces that soyoil weakness is demand-driven at the margin rather than purely speculative, and explains why futures are adjusting faster than physical values.

Europe remains structurally a rapeseed oil market rather than a soybean oil market, and that was visible again in the ARAG window. RME barges traded actively, with producers selling flat prices broadly in the $1,440–1,460/mt range, locking in margins despite weaker BOPO and global soyoil. FAME was quieter. At the same time, producers selectively bought back HVO Class 2 around $2,575/mt. That combination reads as balance-sheet and policy optionality management rather than outright bullishness, reinforcing that the marginal decision in Europe still revolves around rapeseed oil and paraffinic fuels, not soyoil.

The rapeseed balance is increasingly global. The U.S. has quietly become a major rapeseed oil consumer, importing roughly 3 million tonnes, largely from Canada, driven by renewable diesel and HVO demand. Those volumes continue to enter the U.S. tariff-free under USMCA even as the broader U.S.–Canada trade relationship remains politically unsettled. Australia adds another layer: with its large canola seed crop, it naturally looks to Europe as a destination. If trade frictions between the U.S. and Canada were to escalate, or if Canadian access to China remains closed, Europe would likely absorb additional displaced flows, tightening the Atlantic rapeseed balance further.

Canada itself provides a useful contrast on policy effectiveness. The LCFS framework is functioning as designed, with record credit generation pushing prices to multi-year lows. That decline reflects expanding supply rather than demand failure and continues to underpin domestic biofuel production and canola oil consumption. In practice, it reinforces Canada’s role as a structural sink for rapeseed oil even as global veg oil markets soften.

Today’s softer inflation print adds an important macro overlay. Beyond reinforcing expectations for lower interest rates, it likely gives this administration more room and conviction to push ahead with tariffs. With inflation pressure easing, the political cost of trade measures diminishes, shifting tariffs from a tail risk to a more credible policy lever. For biofuels and veg oils, that matters because trade flows, not outright demand, sit at the margin.

Options markets reinforce that policy-centric view. Implied volatility on at-the-money soyoil calls sits unusually low near 25%, rising above 30% only further out of the money, while open interest remains largely unchanged. This reflects how U.S. biofuel optionality has shifted away from feedstocks and toward policy, namely RINs. With D4 RINs hovering around 1.08 and drifting lower, the market is signaling limited confidence in near-term upside for U.S. biodiesel and renewable diesel margins. Cheaper feedstocks alone are not enough to unlock incremental demand.

D4 RINs

Against that backdrop, SAF developments in Asia are quietly more consequential than European pricing suggests. Japan has moved from pilots to execution, with domestic HEFA SAF production online, multiple projects in the pipeline, and a formal 10% usage target by 2030 backed by capital subsidies, operating tax credits, and feedstock support. Singapore is implementing a centralized SAF procurement model funded through a fixed levy, socializing price risk and creating predictable offtake across Southeast Asia. Together, these frameworks are underwriting long-dated lipid demand even if spot volumes remain modest.

Overall, the market continues to price surplus without panic. Futures are clearing, physical markets are holding, and window activity is active but defensive. With weak energy, soft non-China soybean demand, tariff risk becoming more credible, and policy increasingly shaping flows, the path of least resistance for soyoil and BOPO still looks lower — even as rapeseed oil remains Europe’s anchor and canola and SAF policy quietly reshape the forward balance.