
Export commitments have been at an all-time high as US soyoil prices have been quite competitive. We have even seen 65Kt of soyoil shipped in November to China. Many traders on Friday reacted to the possible restriction on UCO import having a direct impact on the demand for soyoil, but clearly, the trade is simply wrong under the current IRA/45z rules . The IRS attempt at guidance on Friday essentially stated that they would not welcome UCO imports until the GREET model is finalized between the Department of Energy and Treasury and that some sort of mechanism for traceability is agreed upon. They also implemented a comment session that will be open through April 10, so don't expect much clarification until mid-year. The reaction from the industry will be to lower operating capacity and rely on domestic waste streams that are rewarded not only under 45z but also under LCFS - remember nearly 60% of the diesel in California is HVO. What the trade doesn't understand is that the calculations under GREET are not necessarily good for soyoil, as many other feedstocks will have much lower carbon intensity. Additionally, last year we probably exceeded the Renewable Volume Obligation by close to (1 Billion Gal) 5 Mil Metric Ton. I don't think we will see this under the current uncertainty - so expect at least a 20% drop in feedstock demand in the US for the first 6 months of the year and that is what the D4 RINs are telling us now trading at 0.735 c/gal. Meanwhile, in Europe, the market was mixed on the impact of Russian sanctions except for UCOME, which was relatively strong, ending the day at $1411/mt in ARAG. However, it would seem that the biggest beneficiary of US restrictions on UCO from China would be Europe.

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