Title: Tight Stocks, Tighter Margins: Can Policy Catch Up With Biofuel Reality?

The biodiesel and renewable diesel landscape remains in flux this week, with Europe’s spot premiums still strong despite stable ICE gasoil around $608/mt. In the ARAG barge market, FAME 0 traded as high as +700/mt, settling at $1,318/mt, while UCOME held firm at $1,446/mt. With European natural gas down 32% YTD, replacement margins—$90/mt for FAME 0 and $214/mt for UCOME—are becoming more manageable, though logistics remain strained. Despite rainfall, Rhine River levels are still too low for unrestricted barge traffic, keeping supply routes tight and inventories defensive.

Stateside, the market tells a more cautionary tale. The NOPA March crush fell slightly to 194.5 million bushels, down 0.9% month-over-month. But the bigger surprise came from soybean oil stocks, which plunged to 1.498 billion pounds—down 19% YoY and marking a 10-year low. This tightening has underpinned BOGO’s bounce to +435/mt, despite soybean oil still in carry through July (-$0.49/bushel). The result? Biodiesel screen margins worsened again, hitting -38c/gal, driven by a slip in D4 RINs to $1.04 and a lack of bullish direction from biofuel policy.

Yet not all is stagnant in Washington. Fresh momentum appears to be building around 45Z tax credit reform. A new draft in Congress reportedly has broader bipartisan traction and includes the removal of ILUC penalties under the GREET model—something that could lift credit values by 25–30 gCO2e/MJ for crop-based feedstocks like soy and canola. Some are questioning why this change requires legislation at all, arguing that the EPA and IRS could enact the shift administratively. But given the high political stakes, especially with foreign feedstocks like UCO potentially excluded, clarity on ILUC could act as a pivotal trigger for feedstock repricing.

Looking abroad, oilseed crush isn’t showing signs of fatigue. According to USDA’s April OCS report, global soybean crush is forecast at a record 354.8 million metric tons, supported by strong demand for meal and oil. U.S. soybean exports are up 10% YoY, and soybean oil exports have surged to 2.3 billion pounds—if realized, the highest since 2019/20. This is occurring despite shrinking domestic biofuel demand for SBO, reinforcing the idea that export markets are partially offsetting domestic uncertainty. Still, U.S. farmers intend to plant 4% fewer acres of soybeans in 2025, which may set the stage for tighter supply into the next cycle.

In short, market fundamentals remain bullish in Europe and mixed in the U.S., while the policy debate over ILUC could tip the scales sharply if resolved. BOGO’s strength despite soybean oil carry suggests latent risk pricing, and U.S. margins may not improve meaningfully until Washington provides firmer guidance. The urgency is real: without alignment between price signals, supply data, and credit frameworks, the biodiesel complex could remain stuck in neutral while the world moves on.