Biofuels and Fertilizer Markets Start Pricing a Longer War ahead of pivotal weekend

Biofuel markets are again moving toward the center of the global energy discussion, but one of the most important developments today is that fertilizer is now entering the same risk equation. As crude trades above $100 and distillate markets tighten, policymakers are no longer reacting only to fuel. They are starting to react to the agricultural input chain as well. Gasoil Apr/Jul backwardation resumed its ascent now that Mar expired and it is telling us that this crisis is harldly over moving higher by a full standard deviation today.

That is why the expected announcement from the U.S. Secretary of Agriculture on fertilizer matters so much. The timing is difficult to ignore. Spring planting is approaching, diesel prices are rising, and fertilizer production has already been under pressure in Europe because of energy costs. When governments begin speaking publicly about fertilizer during an oil shock, it usually means they do not expect the disruption to fade quickly.

This is critical for biodiesel and vegetable oil markets because energy, fertilizer, and crop production are tightly linked. High crude raises diesel. High diesel raises farm costs. High natural gas and power costs pressure fertilizer production. Higher fertilizer and freight costs then raise the cost base for oilseed production and movement. Once that chain is set in motion, vegetable oils stop trading as purely agricultural products and begin trading as part of a broader energy and food security complex.

Vegetable oil markets held firm today despite volatility elsewhere. European rapeseed oil traded near €1,170 per metric ton while Dutch soyoil for April was indicated around €1,140 per ton and German origin soyoil around €1,175 per ton. Sunflower oil offers in Northern Europe remained close to $1,480 per ton. In the United States soybean oil futures traded around 67.4 cents per pound, which equates to roughly $1,486 per metric ton. Palm oil paper markets traded near $1,155 to $1,160 per ton for nearby months.

Those prices show that vegetable oils are again trading like energy feedstocks. When crude and distillates tighten, bioenergy crops move with them because they are among the few scalable renewable substitutes for middle distillates.

Physical biodiesel trading in Europe remained active through the day. Window trades showed FAME premiums mostly between $265 and $280 above ICE Gasoil with one late trade near $290. UCOME traded around $375 to $400 while RME trades printed mostly between $340 and $355. HVO Class II cargoes traded around $1,255 to $1,285 and HVO Class IV near $1,530. One SAF cargo traded around $1,230 above ICE Gasoil.

Spot indications across the wider market show similar relationships. RME near $1,469 per ton and FAME around $1,329 per ton compared with gasoil near $1,127 per ton equivalent leave biodiesel roughly $200 per ton above petroleum distillates. HVO premiums remain closer to $300 per ton depending on grade. Those are meaningful premiums, but in an environment where the petroleum barrel is short of distillate, renewable molecules regain strategic value quickly.

In the United States the policy side continues to anchor biodiesel economics. D4 RIN futures traded around $1.55 today. Inflation adjustments using the GDP implicit price deflator suggest the base amount for the upcoming clean fuel production credit (45Z) could reach roughly $1.09 per gallon for 2026. That gives the market an important policy reference point at the same time that physical energy risk is rising.

Feedstock markets are also absorbing fresh trade friction. Brazilian exporters reported tighter sanitary inspections on soybean shipments to China during the peak export window. At the same time Chinese soybean meal futures reached contract highs. Any disruption to soybean flows between Brazil and China has the potential to shift oilseed balances and tighten vegetable oil availability further. That matters even more if fertilizer markets also tighten, because then both the input side and the flow side of agriculture come under pressure at once.

The connection to distillates is direct. Heating oil futures traded near $4.00 per gallon while residential heating oil prices in the United States moved above $5 per gallon. Retail diesel prices average roughly $4.86 per gallon across the United States. Singapore gasoil remains near $195 per barrel and refining margins remain around $42 per barrel. These are still very high numbers and they show that middle distillates remain the tightest part of the barrel.

The crude market itself continues to tighten. Brent closed near $102 per barrel while WTI approached $97. Saudi output has reportedly fallen to roughly 8 million barrels per day, about 2 million barrels per day below recent levels. Across the Gulf, total disruptions now approach 10 million barrels per day as exports through the Strait of Hormuz remain severely constrained. At the same time roughly 2.35 million barrels per day of refining capacity in the Middle East has been forced offline because of the conflict.

This combination matters because the missing barrels are not easily replaced. Asian refineries are designed to run medium and heavy sour crude from the Persian Gulf. When those grades disappear they cannot easily be replaced by U.S. light sweet crude. Canadian heavy crude largely flows into the United States while Venezuelan crude rarely moves into Asian refining systems. The system is not only losing barrels. It is losing the specific barrels many refineries are built to process.

Shipping data illustrates the scale of the disruption. In mid February daily flows through the Strait of Hormuz ranged between roughly 20 million and 26 million barrels per day. By early March those flows had collapsed to minimal levels. That is why distillate prices remain high and why the risk now extends well beyond crude.

Governments are already reacting. Brazil eliminated diesel taxes and introduced a 12 percent levy on crude exports while also applying a 50 percent tax on diesel shipments. Petrobras then increased diesel prices to distributors by 0.38 reais per liter, bringing the distributor price to 3.65 reais per liter. Brazil is doing this during soybean harvest and corn planting, which shows how quickly fuel inflation becomes an agricultural problem.

That is also why fertilizer deserves to be near the top of today’s discussion. If the administration is preparing a fertilizer response now, it suggests officials believe the war risk may persist through planting. If that is correct, the next phase of the market will not be only about crude and diesel. It will also be about crop input inflation, planting margins, and the cost of moving agricultural commodities through a higher energy environment.

Energy, agriculture, and biofuels are now moving together.

Before the war accelerated at the end of February, Brent traded close to $60 per barrel. During the 1979 Iranian crisis oil prices rose roughly 2.5 times as supply disruptions and panic buying tightened markets. Applying that historical multiple to the pre-war price implies roughly $150 Brent if escalation continues.

That is why this weekend may prove pivotal.

If shipping through Hormuz remains constrained and production losses persist, markets could open next week facing a deeper supply deficit, a refinery mismatch, and growing concern about fertilizer and farm input costs. Under those conditions crude, diesel, fertilizer, and vegetable oil markets could all move significantly higher together.