Policy Rumors Drive Futures While Forward Biodiesel Crush Remains Under Water

The story today is policy and geopolitics.

D4 RINs pushed higher again with December 2026 printing 1.545 late afternoon, up 0.325 on the session. That strength, combined with a sharp rally in distillate, has pulled the March biodiesel screen crush back into marginally positive territory near 1 cent per gallon.

That improvement is isolated to the front. May still shows a loss near 17 cents per gallon and July around 24 cents per gallon. Even with D4 above 1.50, the forward curve does not support sustained plant economics at current feedstock levels.

Distillate is doing the heavy lifting. ICE gasoil rallied to 733.75, up 34.75 on the day and roughly 60 dollars per metric ton above the February 13 low. Heating oil futures reflect the same strength, with HOH26 at 2.5951, up 7.6 cents. The broader energy complex remains supported by geopolitical tension and renewed risk premium in crude. Investors continue to focus on risks tied to Iran and unresolved Russia Ukraine negotiations, which have kept the distillate complex bid. We cannot forget that screen Heat crack went to nearly $43/mt today!!!

Against that macro backdrop, physical liquidity in ARAG remains thin. Only two window trades were reported. RME printed at 1,412.50 per metric ton, up 23, and FAME 0 at 1,357.50, up 40. All other levels were assessed basis paper. When flat price rallies but physical participation remains shallow, it suggests positioning rather than end user urgency.

On the feedstock side, CME March soyoil settled at 58.45 cents per pound, up 2.02 percent on the day. The move is linked to expectations that EPA is likely to transmit 2026 Renewable Volume Obligations to the White House for review this week. Market talk centers on a possible final mandate announcement before the end of next month. That expectation is now embedded in the board.

The policy layer goes beyond RVO volumes. Earlier White House guidance proposed allowing biodiesel producers to qualify for tax credits regardless of offtake structure, while limiting eligible feedstocks to North American origin and extending the credit through 2029. The interaction between higher RVO volumes and 45Z implementation will determine whether soybean oil demand strengthens structurally or remains episodic.

If EPA proposes a meaningful increase in biomass based diesel volumes and signals firm enforcement, D4 tightens further and forward crush improves. If volumes disappoint or compliance flexibility remains wide, D4 retraces quickly and current board strength unwinds.

Bean oil in dollars per metric ton shows March near 1,312, up 20.50 on the day. Expressed versus gasoil, ZLH26 against GASH26 remains elevated near 1.79. The crush only stabilizes because gasoil rallied more aggressively than feedstock and because D4 strengthened. Remove either pillar and margins compress again.

In South America, there is additional noise. A 48 hour strike initiated by the Maritime and River Union Federation in Argentina is affecting port operations, with broader union participation expected. The action targets labor reform discussions and may temporarily disrupt crushing and export flows. Physical soyoil bases in Argentina and Brazil have moved lower, partially offsetting higher CME futures. Any prolonged disruption could tighten nearby supply, though at this stage the impact appears short term.

LCFS credits continue to grind higher with the California index hovering around 71 dollars per metric ton of CO2, up from near 60 in late January. That strengthens the pull of product into western markets and partially cushions negative screen margins, though the screen referenced here excludes LCFS and 45Z values.

The bottom line is clear. March economics have turned slightly positive due to a combination of higher D4 and a 60 dollar per metric ton rally in gasoil since mid February. The forward curve remains negative. Physical trade in Europe is thin. Soyoil is trading on policy expectations rather than crush fundamentals.

The market is pricing optimism on EPA announcements. It is not yet pricing certainty. If EPA delivers a strong 2026 biomass based diesel mandate, the entire strip reprices higher. If the proposal falls short of expectations, D4 and bean oil face a fast correction and forward crush deteriorates further.