February US Feedstock Collapse Highlights Market and Legislative Chaos

The latest EIA data for February paints a grim picture for biodiesel and renewable diesel (RD) producers, highlighting a severe contraction in feedstock usage. Compared to the same period in 2024, overall feedstock consumption has plummeted by at least 33%, underscoring a dramatic decline across the biodiesel/RD value chain. Particularly affected is canola oil, with usage witnessing the steepest drop, followed closely by soybean oil, which experienced a staggering 54% reduction year-over-year.

In Europe, the dynamics in soft oil markets are rapidly adjusting. Currently, soybean oil prices have declined significantly, now trading at a discount of approximately 20-30 euros per metric ton below rapeseed oil. This reflects shifting market preferences and adjustments to demand fluctuations, particularly as feedstock use trends downward in biodiesel production.

Market spreads also reflect these evolving conditions, with the Bean Oil-Gasoil Spread (BOGO) decreasing by 2.5% to stand at +486 USD per metric ton. In contrast, the Palm Oil-Gasoil Spread (POGO) remains unchanged at +327 USD per metric ton. Meanwhile, gasoil prices are steady but subdued, hovering just below $590 per metric ton due to a lack of significant market-moving news.

Adding to the market uncertainty, the U.S. Congress recently introduced a bill that advocates reinstating the Biodiesel Tax Credit (BTC) alongside the existing Production Tax Credit (PTC) under section 45Z. While the move has been applauded by fuel retailers, it signals a disconnect among policymakers, who appear out of step with the practical solutions required to address the industry's challenges. Furthermore, the simultaneous operation of both the BTC and PTC would likely cause extreme chaos within the industry, leading to market distortions and complicating strategic planning for producers.

Amid these headwinds, palm oil emerges as a notable exception. Indonesian palm oil production is forecast to reach 47 million tonnes in the 2025/26 season, marking a robust increase driven by favorable weather conditions and improved yields. This could potentially alter market dynamics, providing a more competitive feedstock option amidst a backdrop of otherwise declining usage rates in traditional oils.