The Bean Oil-Palm Oil Blowout: Trading the Great Decoupling

For global biodiesel and renewable diesel traders, today’s market is a tale of divergent realities rather than a uniform trend. We are witnessing a complex decoupling where tightening soy dynamics collide with bearish palm data, and where severe logistical nightmares in the US contrast sharply with deceptive stability in Europe.

Operational hostility currently defines the North American landscape. We are facing active bottlenecks on the Mississippi River, where gauges near St. Louis are reading -1.0 feet and Memphis has dropped below -5.0 feet. This is a tangible hazard forcing barges to light-load, creating delays and driving up freight costs just when producers need efficiency most. Adding to this physical constraint is renewed regulatory anxiety; the EPA's recent "commitment" to a 90-day review for new SRE petitions looks to me like an open invitation that could further dilute RVO demand. Despite this bearish signal, D4 RINs managed a minor rally late in the session to 1.017, a flicker of support likely stemming from macro relief as traders position for an anticipated end to the government shutdown.

These domestic headwinds are compounded by a complete lack of export interest from our biggest buyer. China is actively snubbing US origin, with zero soybean cargoes inspected for China through early November. Instead, their voracious appetite—evidenced by a 5 MMT hike in their 24/25 import forecast—is being fed entirely by Brazil, where planting advanced to 61% last week despite sporadic rain delays.

However, this bullish soy dynamic must be squared with today's bearish data from Malaysia, where palm oil stocks have surged to a 6.5-year high of 2.46 million tons following a decade-high in production. We see this disconnect play out violently in the BOPO spread, which rallied nearly 18% today to just shy of +$120/MT. While I had anticipated this spread inverting negatively like last year, the sheer weight of bearish palm has instead lifted it by over $100/MT from recent lows. I still believe bearish bean oil fundamentals will eventually catch up, but for now, palm is the anchor.

In contrast to generic vegetable oil, specialized waste feedstocks are finding highly calibrated policy support. Singapore’s new SAF levy is a perfect example of this precision. On a typical ultra-long-haul flight to the US, combined passenger levies generate roughly $2,800 USD—effectively funding one metric ton of SAF at current prices. This is not an arbitrary tax; it is a direct financing mechanism for Singapore's 1% mandate, creating a hard demand floor for waste-based fuels.

Meanwhile, Europe offers a deceptive stability. While Rhine logistics are calm, the ARA window masks significant volatility in the underlying energy complex. The real story is ICE Gasoil, which is in extreme backwardation due to Lukoil declaring force majeure in Iraq, removing roughly 480,000 bpd from the market. This energy strength is distorting traditional indicators. BOGO has rallied over 3% to nearly +$382/MT. Crucially, this is happening despite the underlying feedstock being well-supplied, evidenced by the Dec/Jul soybean oil spread sitting in a deep carry at -1.35 cents/lb due to the continued lack of export demand.

Ultimately, this is a market of disjointed realities resulting in universal margin compression. Whether it's the widening US BOHO spread, Asian inventory overhangs blowing out the BOPO, or European energy shocks masking feedstock weakness, the pressure is on. For traders, the edge now lies in distinguishing between macro energy noise and actual biofuel fundamentals to navigate this global squeeze.