Biodiesel Outlook After WASDE: Plenty of Feedstock, Tougher Demand Ahead

The September WASDE gave little comfort to oilseed markets. U.S. soybean acres were lifted slightly while yields edged down, leaving production just over 4.3 billion bushels — marginally higher than August. Crush was revised up 15 mbu, but exports were cut by 20 mbu, leaving carryout near 300 mbu. That equates to a U.S. stocks-to-use ratio around 7%. Yet the global picture looks far heavier: world soybean carryout is pegged near 124–125 MMT, implying a stocks-to-use ratio close to 30%, with most of that inventory concentrated in South America. Notably, USDA is projecting nearly 25 MMT more global soybean demand in 2025/26 versus last year, driven by higher crush and exports — an assumption that looks ambitious given current market signals.

Corn again overshadowed the report, with production raised to 16.8 billion bushels and carryout still above 2.1 billion — a heavy overhang that caps any bullish spillover into the oilseed complex. Wheat offered the only small offset, with U.S. exports revised higher, but global output grew by 9.3 MMT thanks to larger harvests in Australia, Canada, Russia, and Ukraine.

On energy, ICE gasoil continues to trade rich relative to demand. August expired a full $100/mt below July, only for September to settle at $698.75, retracing $30/mt. This writer believes gasoil market is effectively carrying a $100/mt geopolitical premium tied to Russian sanctions risk. Fundamentally, Europe is exiting the driving season, and the demand picture has yet to change dramatically.

The biodiesel curve shows two very different signals. BOGO reflects the feedstock side, where the Sep–Jul spread settled at –$101/mt, a steep contango that highlights just how heavy the soybean oil vs. gasoil relationship has become. In contrast, European paper premiums remain firm and backwardated, with FAME at +43/mt Sep–Jan 26 and RME at +42/mt. Liquidity, however, is thinning: RME slipped below 200 kt in week 37 (from just above 200 kt in week 36), while FAME volumes again surpassed 200 kt early in the session, underlining front-end unwinding.

In Asia, stocks remain a problem. Malaysia is set to close September at ~2.33 Mt, while Indonesia likely holds above 3.0 Mt. Despite bargain buying lifting Bursa CPO, trade flows remain weak. Jakarta is now floating a B45 mandate before B50, but with actual blending often falling short of 40%, ambitions remain more political than practical. The government faces not just logistical bottlenecks but also budget fights over subsidy allocation, making higher blend targets aspirational at best.

The key learning from today’s WASDE is that feedstock is ample — perhaps even too ample. The USDA is projecting nearly 25 MMT of additional global soybean demand in 2025/26, but current indicators suggest the opposite: sluggish sales, heavy palm stocks, and fading biodiesel demand. Q4 will be the decisive test, and all signs point to a tougher demand environment than the USDA assumes.