The U.S. Soyoil Island Expands While Europe Trades Prompt Tightness

Europe remains a prompt physical biodiesel story driven by barge activity. NWE window trades showed RME at 50 to 70 over front month ICE gasoil. FAME traded at 50 to 99 and UCOME at 205 to 208. Using front month ICE gasoil April at $1,387.50 per metric ton, this implies flat prices of $1,437.50 to $1,457.50 per metric ton for RME, $1,437.50 to $1,486.50 for FAME, and $1,592.50 to $1,595.50 for UCOME. HVO Class II printed at 1,250, implying about $2,637.50 per metric ton, and SAF at 950 implies about $2,337.50. The spread between UCOME at 208 and FAME at 50 is $158 per metric ton, confirming that waste-based barrels remain structurally tight. This is a physical signal with strong prompt demand supported by the distillate complex.

In the United States, the system is now clearly dominated by soyoil. May bean oil is 68.64 c per lb, or $1,507.95 per metric ton. July is $1,508.61 and December $1,430.56. Oilshare is 0.5208, or 52.08 percent. Bean oil as a percentage of gasoil is 1.2277 for May and rises to 1.6751 for December. Relative value remains stretched with BOPO at $361.49 for May and $372.52 for July, while POGO is only $34.50. Against Malaysian palm around $1,140 to $1,155 per metric ton, U.S. bean oil carries a premium of roughly $350 per metric ton.

The curve structure confirms that this is not a nearby shortage. May July is essentially flat at around 0.01 c per lb, while July December has widened to 3.55 c per lb. That backwardation in the back end now looks vulnerable even without assuming large inflows of South American soyoil into the U.S. Paranaguá FOB soyoil premiums are trading in a range of roughly minus 1,000 to minus 1,400 points against Chicago depending on shipment timing. These are weak levels, but not weak enough relative to where flat price futures are trading. If bean oil at $1,508 per metric ton truly reflected a structurally tight global balance, Paranaguá premiums would likely need to push significantly lower. The fact that they are not indicates that the global system is not validating the current U.S. price level. That disconnect leaves the July December spread exposed and likely to compress.

The crush structures need to be read separately. Soymeal is flat through September, so the soybean crush is driven almost entirely by oil, which explains oilshare above 52 percent. The biodiesel screen crush is also backwarded but for different reasons. Margins are 1.3058 for May, 0.6570 for July, and 0.5203 for September. That is a drop of 0.6488 from May to July and 0.7855 from May to September. This is not a signal of tight compliance given the D4 carry into 2026. It is margin compression as feedstocks rise faster than biodiesel values.

This contradiction is visible in energy and especially in Asia. In Singapore, spot 10 ppm diesel is trading at $251.21 per barrel, while jet fuel is at $242.06 per barrel, with the jet regrade at +$8 per barrel. Diesel cracks are above $85.63 per barrel, confirming extreme tightness in middle distillates. At the same time, ICE gasoil April is $1,387.50 per metric ton, with April September backwardation at $371.00 and July December at $523.00. Distillates are tight globally, yet U.S. biodiesel margins are weakening because feedstocks have outrun the barrel.

Positioning is amplifying the move. Money manager length in grains and oilseeds is around 700,000 to 750,000 contracts combined, back to levels seen in March 2021 and 2022, even though current balance sheets are not as tight. Over three months, May bean oil is up 37.35 percent, July up 36.51 percent, and December up 30.46 percent. This supports the view that part of the front end strength is driven by speculative participation rather than purely physical demand.

The import arbitrage remains open. D4 RINs at 1.765 imply 2.824 per gallon of gross value at 1.6 RINs per gallon. Even with reduced 45z eligibility, this still attracts foreign supply. Imports will not collapse the market but will cap it, especially with global vegoil priced significantly below U.S. levels.

Globally, supply remains comfortable when viewed across the broader oilseed complex. Oil World projects ending stocks of 144.5 million metric tons for 10 oilseeds in 2025/26, with stocks to usage at 21.2 percent. This does not point to a structural shortage. The U.S. is pricing scarcity through policy and positioning, while the rest of the world is not.

Asia confirms that the constraint is in distillates, not the whole barrel. Fuel oil differentials are easing, while naphtha cracks are above $430 per metric ton. The barrel is fragmented. Biodiesel benefits from tight diesel, but feedstocks are not globally tight.

The market is now split. Europe is trading prompt physical biodiesel tightness. The U.S. is trading a policy driven soyoil premium amplified by positioning. Asia is trading a distillate shortage within an otherwise balanced system.

The adjustment should come through spreads rather than flat price. BOPO at $361.49 is stretched. POGO at $34.50 is too low. July December bean oil at 3.55 c per lb is vulnerable even without a surge in imports. Oilshare at 52.08 percent is the clearest signal. The soybean complex is no longer balanced.