EPA Flexibility Hits Soybean Oil, Diesel Tightness Remains
The most important move today is not the roughly 1% rise in outright soybean oil. It is the collapse in the September/January soyoil spread. September soybean oil is around 68.15 cents/lb against January near 68.64 cents/lb, putting Sep/Jan at -0.49 cents/lb. Earlier this year the spread traded above +3 cents/lb. That represents a reversal of more than 3.5 cents/lb, equivalent to roughly $77/mt. The front of the soybean oil curve has gone from paying a substantial scarcity premium to carrying inventory into January. Yet this does not look like collapsing soybean demand. U.S. new-crop soybean export sales for the week ended August 20 reached 2.478 million tonnes, including another 1 million tonnes plus to China, while new-crop soybean oil export sales were zero. The weakness is concentrated in soybean oil and its domestic biofuel demand signal.
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