Biodiesel margins bound higher over soybean oil variable cost

Midwest biodiesel prices continued to move lower heading into July

Midwest biodiesel prices fell 6.3 percent from July 1 and are down nine percent from a month ago. Despite the lower biodiesel price, margins have improved due to feedstock cost falling at a more rapid pace. RBD soybean prices in Central Illinois fell 11.3 percent over the past week and are down more than 20 percent from a month ago.

Upper Midwest B100 prices averaged $6.88¼ per gallon last week, down from $7.35½ the week prior. Soybean oil crude degummed prices in Central Il averaged 68.81 cents per pound, down from 73.45 cents per pound the prior week.

Crude glycerin prices were unchanged at 18 cents per pound and the cost of methanol edged half a cent lower to $0.275 cents per pound. Biodiesel revenue fell 6.3 percent week over week while variable costs were 10.5 percent lower.

The biodiesel margin expanded from $0.24 per gallon to $0.54 per gallon over variable costs for producers using RBD soybean oil as their feedstock.

Producers able to utilize crude degummed soybean oil are seeing a much stronger margin at $1.78 per gallon over variable costs. Variable costs include a 25 cents per gallon estimate for “other variables” beyond soybean oil, natural gas, and methanol. The overall margin, which includes fixed costs, improved 30 cents to $0.19 per gallon for RBD users.

Crude soybean oil futures at the Chicago Board of Trade have been volatile this year, rising from 56 cents per pound in January to an intraday high of 87.65 cents per pound in April.

The average weekly crude degummed soybean oil price is 26 percent below its recent high, while the average weekly biodiesel price is 1.6 percent lower during the same period. For RBD soybean oil, current prices are seven percent below the recent highs. Reduced feedstock cost and well-supported biodiesel prices have lifted Margins to recent highs for the year.

Soybean oil as biodiesel feedstock: Profitability

The bean oil/heating oil spread (BOHO) measures the profitability when producing biodiesel from soybean oil. The higher the spread, the more costly production. As the spread declines, RIN values generally fall in response to reduced production costs. The opposite tends to be true when the BOHO moves higher.

The value of the BOHO spread on Friday, July 8 was four percent above the week prior, while the 2022 biodiesel RIN was one percent lower at $1.60 per gallon. ULSD prices were seven percent lower week on week, while crude soybean oil futures at the Chicago Board of Trade fell five percent.

According to EPA’s (Environmental Protection Agency) moderated transaction data for the renewable fuel standard program, U.S. domestic biodiesel production declined three percent in May.

Some vertically integrated producers speaking with Fastmarkets Agriculture have indicated that rising biodiesel margins have caused them to increase their biodiesel production, while at least one other continues to sell all the refined oil they can into renewable diesel production.

Soybean oil futures had been struggling against resistance around 84 cents per pound during May and early June but have fallen quickly and have seemed to have found support around 55.5 cents per pound. Price resistance appears to have formed at 64 cents per pound.

Soybean oil prices continue to trend below the 14-day moving average and remain volatile.

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