China’s SAF Pivot Meets Spreads Flashing Red in Soy Complex

Europe is heading into its soybean harvest with expectations of a strong crop, mirroring the United States, where a record-breaking harvest is also in the works. Adding to the pressure, heat across the Midwest is pushing soybeans toward early maturity, and NOAA’s latest 8–14 day outlook points to cooperative weather that should accelerate harvest. USDA Crop Progress data confirms this trend, with several key states already reporting soybeans dropping leaves earlier than average — a clear sign that harvest is arriving sooner than usual.

Markets are also watching U.S.–China trade talks this week, with Chinese officials scheduled to meet with the U.S. Trade Representative. Importantly, U.S. soybeans no longer face the steep retaliatory tariffs of the trade war years — the current duty is 3%, the same as for Brazilian beans. Board crush margins in China remain poor for Brazilian beans but could support limited U.S. origin. Still, with margins thin, actual Chinese buying has been slow to materialize, making this more of a headline driver than a true demand shift.

fm Eduardo Vanin

Meanwhile, spreads are flashing deep red. The Sep25/Jul26 soybean spread is nearly 75 cents per bushel — one of the heaviest pre-harvest carries ( contango) in recent history — and in soyoil, the Sep25/Jul26 structure is collapsing with a contango of 120 cents per pound. These structures signal that bearishness in the oilseed complex could extend well beyond the near term, challenging the sustainability of current flat prices.

max carry in Aug pre-harvest for last 15 years

Europe reflects the same pressure: forward vegoil offers slipped again, with soybean oil FOB Dutch ports at $1,080–1,090/mt and rapeseed oil at €1,045–1,075/mt. Biodiesel markers weakened as well, with RME at $1,399/mt, FAME 0 at $1,359/mt, and UCOME at $1,495/mt. Gross margin compression is visible across the board. At the same time, last week saw almost 500,000 tonnes of European biodiesel paper positions unwound, underscoring how quickly sentiment has soured.

Yet the underlying energy complex tells a different story. Gasoil remains strong, with screen heat cracks holding above $31/bbl and the 20-day WDMA trading above the 50-day — a bullish technical signal. Despite sanctions, Russian product continues to flow with Saudi Arabia and India leading as buyers, ensuring global supply remains flexible. The resilience in gasoil explains why biodiesel paper was so actively traded: diesel cracks are healthy, but the feedstock side (soy and vegoils) is collapsing, leaving a widening disconnect between biofuels and their fossil competitor.

Beyond the short-term trade headlines, the structural shift in China is even more important.

According to the latest GAIN report, China is moving away from biodiesel exports and positioning itself as a major SAF exporter. This pivot was forced by a combination of collapsing domestic demand — with ethanol blending stuck at just 2.1% and biodiesel use barely 750 million liters — and external barriers, as the EU imposed anti-dumping duties of 10–35.6% that slashed biodiesel exports by 40% this year. Dozens of plants shut down, and Beijing redirected feedstock and capital into aviation fuel. More than 40 SAF projects are operating, under construction, or planned, with capacity estimated at 3–3.8 billion liters, compared to token domestic use of just 62.5 million liters in 2025. UCO collection of 5.2 billion liters annually underpins this shift, with Beijing scrapping VAT rebates to keep supply at home.

China SAF pivot

Ironically, U.S. policy is helping accelerate this pivot. By forbidding the use of imported Chinese UCO in American renewable diesel and SAF, Washington has effectively handed Chinese producers a serious competitive advantage. Feedstock that once moved abroad is now locked inside China, securing supply for domestic SAF plants and enabling them to export aggressively to Europe and the rest of the world. In short, China’s biofuels strategy is no longer about blending at home — it is about dominating global SAF exports, and U.S. rules are indirectly supporting that rise.

Meanwhile, the U.S. RINs market remains soft, with Dec25 D4s slipping to 1.111 as traders stay defensive around exemption rulings and the still-pending 45Z co-processing guidance.

The bottom line: With Europe harvesting, U.S. crops maturing early under favorable weather, USDA confirming soybeans are dropping leaves ahead of schedule, spreads flashing red, paper positions being cut, and China pivoting into SAF exports after biodiesel’s collapse — helped along by U.S. policy — the vegoil complex looks oversupplied as we have already said here many times. Strong gasoil cracks show the demand side of the diesel barrel is healthy, creating a volatile backdrop where bio margins compress even as fossil diesel thrives temporarily like now. Traders would do well to watch spreads for signals on flat price, but also how policy choices are now reshaping global SAF trade flows.