Soybean Oil and BOGO Tumble Amid Regulatory and Market Turbulence

Market volatility surged significantly today, with BOGO dropping sharply to +464, driven primarily by a steep decline in soybean oil futures, which fell to 48.93 c/lbs, accompanied by a notable decline in POGO, now significantly lower at +290 for July from the May futures settlement of 51.62 c/lbs. The downturn comes amid legislative gridlock in the U.S., as the much-anticipated "big beautiful bill" faces stiff resistance due to cost concerns. Additionally, the Treasury Department's delay in issuing guidance on the 45Z clean fuel production credit adds uncertainty, reflecting broader administrative challenges with the implementation of the Inflation Reduction Act. Additionally, D4 RINs reacted to congressional obstacles today, rising to 1.09 from 1.06, indicating persistent market hope. Without the anticipated legislation and increased Renewable Volume Obligations (RVOs), RINs prices could escalate significantly to between 1.20 and 1.40. This situation underscores the challenging balance the government faces in satisfying diverse interests, knowing inevitably some stakeholders may be adversely affected.

Internationally, soybean oil FOB Paranagua premiums slightly recovered following the futures dip, now standing at -280 for June and -450 for July—still notably low for this time of year. Nevertheless, U.S. soybean oil exports remain robust at 885kt, suggesting an eventual adjustment in WASDE estimates that could bolster U.S. soybean oil basis, particularly in the absence of decisive Congressional action on biofuel regulations.

In the European market (ARAG), trade activity remained muted, yet prices edged higher, with FAME 0 trading at $1289/mt, UCOME at $1383/mt, and RME narrowing the spread against F0 to $24/mt at $1312/mt. Interestingly, HVO Cl2 & 4 maintained high levels at $1900/mt, starkly contrasted by SAF trading at a discounted $1764/mt. This $136/mt discount of SAF to waste oil-based HVO—despite SAF's higher production costs—highlights an unsustainable disparity, exacerbated by compulsory joint purchases of SAF and HVO in European and Asian markets.

On the agricultural front, the incoming European rapeseed crop appears promising, with forward prices holding stable at EUR 443 per tonne, approximately double the price for soft wheat at EUR 186 per tonne. Factors such as declining Canadian rapeseed stocks due to increased exports, a weaker euro enhancing European competitiveness, and weather-driven yield concerns in Ukraine and Germany are supporting rapeseed prices. Continued dry conditions could further tighten supplies and push prices higher, potentially encouraging farmers to expand rapeseed acreage for the 2026 harvest.

Lastly, regulatory actions and geopolitical tensions remain critical. The Indonesian Palm Oil Association (GAPKI) urged delaying a planned palm oil export levy hike amid proposed substantial U.S. tariffs and demand uncertainties from tensions between major palm oil buyers India and Pakistan. Meanwhile, reports of significantly lower-than-expected U.S. biomass-based diesel blending targets sent soybean oil futures tumbling 6%, reflecting heightened sensitivity and volatility stemming from ongoing regulatory uncertainties and market speculation. Soybean oil futures have been on a short term bull rally since since Feb2025 when 20 day wdma crossed 50day.

These combined factors underscore the intricate interplay of agricultural trends, biofuel regulations, and geopolitical developments shaping today's biodiesel and vegetable oil markets.