IMO Greenlights Feedstock Flexibility as Soyoil Surges

The biodiesel complex finds itself at an intriguing inflection point today. Gasoil has firmed to $634/mt, lending support to downstream blending economics, yet bean oil's sustained rally is dragging BOGO down to +$422/mt. This compression reflects the tug-of-war between higher diesel costs and rising feedstock prices, driven primarily by bullish signals in the soybean oil complex. With the May Soyoil contract printing above 47.88 and decisively above both the 20- and 50-day moving averages, fund-driven momentum is clearly back in the game. The weekly chart has turned constructive, supported by the USDA’s revised outlook for lower U.S. planted acreage.

In South America, FOB premiums for soybean oil from Brazil are still under pressure. Paranaguá cargoes are trading around -450 vs. futures, relatively flat compared to yesterday’s prints. This persistent wide discount underscores the sluggish external demand for South American oil, even as internal B15 blending mandates stabilize domestic consumption. Stroeh’s report confirms that physical oil is offered into Europe at a substantial discount, highlighting the disconnect between futures-led optimism and cautious real-world buying.

Meanwhile, logistical constraints along the Rhine remain a quiet but influential disruptor. Water levels near Kaub are still restricting barge loadings by 10–15%, creating ripple effects for UCOME and FAME barges bound for inland destinations. While the ARAG barge market has seen better clarity in recent days, the inland squeeze limits full arbitrage capture. As a result, UCOME maintains its premium structure, with today’s spot averaging +$837.29/mt over ICE gasoil, significantly higher than FAME at +$696.31/mt.

Amidst these structural challenges, the International Maritime Organization (IMO) may be providing the sector with a longer-term tailwind. The newly endorsed Feedstock Neutrality Clause under the global GHG pricing mechanism represents a shift in philosophy: biofuels will now be judged solely on their carbon intensity and GHG performance—not on the type of feedstock used. This opens the door to greater market flexibility and may soften past biases against crop-based oils like palm or soy. If implemented in October as planned, it could realign feedstock procurement strategies across marine biofuel blenders and beyond. All we need in the US would be to eliminate the RINs retirement for such maritime fuel use. That would provide US bio industry a strong boost.

As Q2 unfolds, traders should pay close attention to feedstock spreads rather than outright flat prices. The UCOME/FAME spread remains structurally elevated above $140/mt, reflecting persistent demand for waste-based fuels even as FAME softens. Meanwhile, the RME/FAME spread narrowed to just €22.19/mt today, signaling reduced interest in cold-weather spec material. With bean oil continuing to rally and Rhine logistics still constrained, positioning around differentials rather than outright direction will likely generate better risk-adjusted returns. In particular, watch for tightening margins in UCOME premiums if barge congestion eases or if IMO feedstock flexibility encourages switching back into lower CI crop oils.