Soyoil Sep/Dec Spread Flashes Red Amid 24% D4 RIN Shortfall

EPA data released last Thursday, just before the SRE announcement, showed how sharply biomass-based diesel production is lagging. In the first seven months of 2023, D4 RIN generation is down 24% versus last year, underscoring a structural weakness in U.S. biodiesel and renewable diesel output. Total RIN generation through July reached 19.2 billion, but the decline in D4s is what matters for compliance.

That weakness sits uneasily with a RINs market where exemptions reduce the obligated pool. On Tuesday, D4s slipped back to the $1.10–1.12 range even as production-linked supply fell. The paradox is clear: fewer gallons require compliance, yet fewer RINs are being minted, keeping traders caught between political decisions and physical shortfalls.

In Europe, margins tell another story. Rapeseed methyl ester (RME) traded in ARAG around $1,410/t with gross margins near $160/t, while Fame 0 was at $1,365/t with margins close to $265/t, and UCOME surged to $1,504/t, translating into margins around $259/t. The key twist is that soyoil is priced almost flat to rapeseed oil in northwest Europe, which is rare and currently boosts F0 economics. But from October 1, winter specification kicks in, sharply reducing demand for F0, which cannot meet cold-weather CFPP requirements. That seasonal shift is already reflected in the RME/F0 spread, which has widened to an August high of $45.50/t — and is likely to extend further into Q4 as buyers pivot to RME and UCOME. The NWE barge market deliveries are already extending to Sep24.

Vegoils remain volatile. CBOT soybean oil slipped back to 52.46¢/lb, while FOB Paranaguá basis soy oil cargoes continued to trade actively. Malaysian CPO futures closed at 4,460 ringgit/t ($1,058/t), with India CFR discussions running at $1,150–1,165/t. Used cooking oil ex-works ARA gained €10/t to €1,065–1,075/t, and hydrotreating-quality UCO in China firmed again to over $1,120/t. Importantly, the Sep/Dec bean oil spread has collapsed into sharp contango, a rare and troubling move that suggests oversupply or weak nearby demand. And the pressure isn’t limited to the front — the Dec ’25/Jul ’26 spread has also turned negative, signaling that bearishness in oil could extend well into next year, regardless of oilshare still holding at ~47%.

Sep/Dec Soyoil

The premium renewable fuels complex remains tight. HVO Class II barges in ARA closed near $2,235/t, while SAF (HEFA-SPK) pushed toward $2,640/t, the highest levels in 18 months. Asian SAF netbacks are also climbing, with Singapore HEFA-SPK above $2,580/t. Meanwhile, in North America, Tidewater Renewables in Canada is seeking four LCFS pathways to access the lucrative California market just months after losing its anti-dumping case against U.S. renewable diesel. It’s a reminder that trade disputes, compliance credits, and regional blending mandates are colliding across borders — and could add another layer of volatility to U.S. RD margins and RIN values.

Timing now becomes critical. The compliance reporting deadline for the 2024 obligation is December 1, 2025. That gives the EPA barely three months to finalize not only the handling of SRE reallocations but also the mandates for 2026–2027. Any delay or legal wrangling risks pushing resolution into 2026, creating major uncertainty for obligated parties trying to cover positions.

The contrast could not be sharper: Europe is still flush with profitable biofuel blending economics while the U.S. industry faces negative crush screens and RINs distorted by exemptions. The 24% shortfall in D4 RINs generation confirms that the compliance market is living on carryover balances and policy relief, not new production. For traders, the strategy now is clear — fade F0 into Q4 and position long RME and UCOME, while managing U.S. exposure around the evolving SRE litigation, LCFS competition, and the ticking clock on RVO finalization. The collapse in soybean oil spreads is a warning that the bean complex may not offer much support for the biofuels balance sheet.