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Key takeaways:
The US Gulf, a key hub for renewable fuel production, has seen particularly strong gains. On Thursday March 5, used cooking oil, delivered US Gulf was assessed at 68 cents per lb, unchanged on the day but holding near a three-year high reached earlier this week and up almost 23% since the start of the year.
Meanwhile, tallow, max 20% ffa, delivered US Gulf was assessed flat on the day at 64.5 cents per lb, an eight-month high and up nearly 20% since the start of the year.
Distiller’s corn oil, delivered US Gulf also reached the highest level seen since Fastmarkets began assessing the market in March 2024, assessed up on Thursday at 70-71 cents per lb, from Wednesday’s 69.5-70.5 cents per lb.
Inland markets have also moved higher alongside the Gulf. Choice white grease, fob Missouri River was assessed on Thursday at 53-55 cents per lb, up from Wednesday’s 53-54 cents per lb and marking a seven-month high. Prices are now up nearly 21% year to date.
Bleachable fancy tallow, renderer-Chicago was assessed unchanged on the day at 61.75 cents per lb, also a seven-month high.
Much of the recent strength in feedstock markets has followed gains in underlying energy and vegetable oil markets. The CBOT soybean oil May 26 futures contract has climbed steadily through late February and early March, settling at 65.7 cents per lb on Thursday, up from 53.74 cents per lb on February 2.
Meanwhile, NYMEX NY Harbor Ultra Low Sulphur Diesel (Heating Oil) May 26 futures rose 24.23 cents on the day Thursday to $3.2378 per gallon. The contract has gained roughly $1 per gallon since the beginning of February, when it traded at $2.2352 per gallon.
The stronger move in diesel relative to soybean oil has improved blending economics for renewable diesel and biodiesel producers, allowing buyers to bid more aggressively for feedstocks across the fats and oils complex as renewable fuel capacity continues to drive demand.
At the same time, pricing relationships within the feedstock complex have drawn attention in recent sessions, particularly the spread between distillers corn oil and soybean oil.
Several producers noted that DCO has recently traded above crude degummed soybean oil, a relationship some market participants view as difficult to maintain over the longer term.
“Bean oil was around 65 cents per pound while DCO was closer to 70 or 71 cents,” one producer said. “That spread seems hard to sustain.”
Market chatter has also pointed to stronger forward demand for biomass-based diesel gallons. Waste-based biodiesel and renewable diesel volumes were reported to be largely sold out for the third quarter, while second-quarter gallons were recently heard trading around HO minus 44 cents per gallon. Midwest pricing was reported to be somewhat weaker relative to other regions.
Still, some producers cautioned that headline margins may overstate the profitability of producing biodiesel or renewable diesel given elevated feedstock costs.
“If you look at feedstock cost versus revenue, there’s margin,” one producer said. “But when you look at the full picture, there’s still not a real net income margin.”
Feedstock prices, the source added, often rise quickly whenever fuel markets strengthen, limiting producers’ ability to capture improved economics.
“The problem is that every time there’s a little bit of good news, the feedstock side pushes prices higher,” the source said.
Some producers also noted that the physical diesel market often trades below futures values, with cash diesel sometimes heard 20-40 cents per gallon under the screen. As a result, futures prices alone may not fully reflect the economics of producing renewable diesel or biodiesel.
Recent strength in diesel markets has also been linked in part to geopolitical tensions involving Iran, which have contributed to higher heating oil futures and tighter distillate balances, though some participants cautioned such price spikes may prove temporary.
“These events tend to cause a spike, but once the news cycle settles down the market goes back to supply and demand fundamentals,” one source said.
Beyond domestic fundamentals, international trade flows continue to play an important role in the US feedstock market.
Imports of rendered fats – particularly from Brazil and Australia – have re-entered the conversation in recent weeks after tariff reductions made the material more competitive in the US market. Several sources said Brazilian tallow volumes could begin moving more freely into the US following the policy change.
Australian exports have also drawn attention this week, with traders reporting sharp increases in prices for export bleachable fancy tallow amid stronger demand from the US and other international buyers.
Despite policy incentives favoring North American feedstocks under the upcoming 45Z clean fuel production credit, international feedstocks are widely expected to remain part of the global supply mix.
Some sources noted that renewable diesel producers may continue importing feedstocks while exporting finished fuels to overseas markets where US tax incentives are less relevant, allowing producers to optimize margins across global markets.
Interest in International Sustainability and Carbon Certification (ISCC) feedstocks has also increased as producers evaluate opportunities in global renewable diesel and sustainable aviation fuel markets.
The push toward certification appears to be driven largely by export demand, as overseas buyers often require certified feedstocks and fuels. Collectors of used cooking oil and other waste feedstocks have reportedly shown growing interest in certification in recent months as they seek access to international markets where demand for certified fuels remains strong.
The market has also been watching closely for the upcoming Renewable Volume Obligation (RVO) proposal from the US Environmental Protection Agency, which sources said is currently undergoing review at the Office of Management and Budget.
Several participants expect the proposal could arrive toward the end of March, with market expectations generally centered around volumes similar to previously discussed levels while small refinery exemption reallocation could reach at least 50%.
Until more clarity emerges on policy and fuel demand, feedstock values are expected to remain closely tied to movements in energy and vegetable oil markets.
For now, stronger energy markets and improved renewable diesel and biodiesel margins have supported sentiment across the US animal fats and oils sector, though views remain mixed on how durable the recent improvement in feedstock demand may prove.
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