Biodiesel Squeeze Deepens as Policy Pushes Production, Not Blending

The U.S. biodiesel screen crush widened again to nearly 50 cents per gallon negative, despite soybean oil futures holding above 51 cents per pound. This widening underscores how difficult blending economics remain in the U.S., even as feedstock values have softened lately.

Biodiesel Screen Crush Margin

Much of this weakness is tied to the policy shift from the $1 per gallon blender’s tax credit to the 45Z producer credit. The former supported blending, while the latter supports production without ensuring consumption. The result is clear in the data: U.S. biodiesel imports collapsed to 2,000 barrels per day in the first half of 2025 compared to 35,000 barrels per day a year earlier, while renewable diesel imports fell to 5,000 barrels per day from 33,000 barrels per day. Domestic consumption is also down sharply, with biodiesel off 40 percent year-on-year and renewable diesel down 30 percent.

This disconnect shows up in market structure, where BOGO has built a record contango of nearly 100 dollars per metric ton into July 2026. The steep contango reflects deferred demand, rewarding storage rather than blending, and highlights the lack of near-term incentives for physical pull-through. These high carrying charges are much like what we are seeing in soybeans.

BOGO Sep25 to Jul26

In the ARAG barge market, liquidity was strong. RME traded at 1,414 dollars per metric ton flat price, against rapeseed oil at 1,246 dollars per ton, giving a gross margin of plus 168 dollars per ton. FAME traded at plus 680 dollars per ton over ICE gasoil, equating to about 1,358 dollars flat, versus soybean oil at 1,281 dollars per ton, yielding a gross margin of plus 77 dollars per ton. UCOME traded at plus 811 dollars per ton over gasoil, translating to around 1,489 dollars flat, against used cooking oil at 1,295 dollars per ton, for a gross margin of plus 194 dollars per ton.

Vegetable oils in northwest Europe softened, with soyoil at 1,095 euros per ton in Hamburg, equivalent to 1,281 dollars, and rapeseed oil at 1,065 euros per ton in Rotterdam, equivalent to 1,247 dollars. Sunflower oil offers into the Mediterranean were steady around 1,275 to 1,285 dollars per ton. CME soyoil continues to hover near the 50 cents per pound support level, with heavy call option interest clustered in the 60 to 65 cent strikes where volatility is below 30%.

Globally, Asia is innovating with enzymatic biodiesel processes at Danseok, Europe is showing resilience despite political instability in France, and the U.S. remains in a policy trap where production is incentivized but blending is not while no one is addressing how we are going to store this bumper US crop.