Palm Slips, Soy Soars, and BOPO Blows Out — Traders Brace for Policy Lull

The Northwest European biodiesel market held up well today despite a softening gasoil backdrop. RME traded at $1,369.50/mt flat price and FAME 0 at $1,347.50/mt, resulting in a narrow RME/FAME spread of $22/mt. UCOME traded at a flat price of $1,459.50/mt, showing a robust $112/mt premium to FAME 0. Gross margins remain strongest for UCOME at over $200/mt, while FAME 0 margins remain near breakeven. The window was active with nine RME trades and seven UCOME deals reported.

Despite firm physical premiums, ICE swap volumes declined significantly in week 30, suggesting summer liquidity fatigue or cautious positioning ahead of the August lull. RME paper volume dropped 57% to 130 kt, UCOME fell 58% to 137 kt, and FAME held at 181 kt — all far below levels observed in June. Earlier, bullish sentiment had driven Q4 RME swaps up to $688/mt. The BOGO contango remains in place, with a $61/mt spread between front-month and December, encouraging forward storage of biodiesel even as gasoil curves remain in backwardation.

In the U.S., soybean oil futures continue to rally, underpinned by speculative momentum and broadly constructive crop conditions. The latest USDA Crop Progress report shows corn at 56% silking and soybeans at 64% blooming, with 74% of corn and 68% of soybeans rated in good to excellent condition. Crop development remains near or slightly behind the five-year average due to recent wet weather, but planting pace was ahead of historical norms. Outlook remains favorable, with most fields positioned for above-average yields if weather remains cooperative. However, the CBOT rally continues to outpace physical fundamentals, especially as Paranagua FOB soybean oil basis weakens. September cargoes are now bid between -470 and -500 under futures, or over 5 cents/lb discount, suggesting physical demand remains out of sync with speculative futures pricing.

US Crop progress

Meanwhile, palm oil prices have softened due to rising production and export flows. Malaysian CPO output rose more than 11% in July, and Indonesian exports jumped 15% in May. This divergence between firm soybean oil and weak palm oil has pushed the BOPO spread to $253.98/mt — the widest level in months and a clear signal of U.S.-driven pricing dislocation.

BOPO

Asian feedstock signals are mixed. UCO CIF ARA is holding firm at $1,110/mt, with minimal spot availability. RED UCO FOB China rose $15/mt to $1,080/mt, but UCOME FOB Straits softened by $5/mt to $1,240/mt, pointing to weaker demand. The 45Z tax credit continues to skew global trade flows by limiting the attractiveness of imported feedstocks in the U.S. market.

In Washington, Congress begins its summer recess Thursday and will not return until September 5, leaving little room for legislative momentum on renewable fuel guidance or 45Z rulemaking. Focus has shifted to trade diplomacy. The U.S. finalized a new tariff arrangement with Japan, granting them a 15% duty rate and likely excluding them from the 30–35% tariffs facing the EU, Mexico, and Canada starting August 1. However, it remains unclear whether non-tariff barriers on U.S. agricultural exports have been addressed, leaving uncertainty for feedstock exporters navigating multiple policy frontiers.