Lower soybean oil price boosts biodiesel margins

Midwest soybean oil prices moved lower for the first time in four weeks

Midwest soybean oil prices fell and moved lower for the first time in four weeks and last week’s price decline was more noticeable than the slight drop in biodiesel price for the week.

This benefitted margins, which moved higher. Rapidly than biodiesel values last week. Just as the market was starting to settle in with the spread narrowing below ten cents, the gap is now widening and may continue to do so in the coming weeks.

Soybean oil prices had been moving higher following the October NOPA soybean oil stocks report, which placed soybean oil stocks at a 24-month low.

Last week, NOPA provided its November update, showing that soybean oil stocks climbed nine percent from the previous report’s low. While stocks are up, they are still 17 percent lower than they were a year earlier.

The Environmental Protection Agency (EPA) showed ancillary data supporting decreased domestic demand for soybean oil during October from the biofuel industry. The USDA’s World Agriculture Supply and Demand Estimates (WASDE) place US domestic biofuel demand for soybean oil at 46 percent of domestic use projections. According to the EPA’s monthly biofuel blending report, domestic biodiesel blending and renewable diesel blending were down three percent and 13 percent, respectively.

Soybean oil is a primary feedstock in the production of biodiesel and, to a lesser extent, renewable diesel.

Upper Midwest B100 prices averaged $7.34½ per gallon, down from $7.36½ the week prior. Central IL RBD soybean oil prices averaged 90.59 cents per pound, down from 92.64, while crude degummed prices fell a penny per pound to an average weekly price of 81.34 cents per pound. RBD soybean oil price fell more rapidly than crude-degummed prices allowing the spread in pricing between the two grades to narrow.

Biodiesel revenue declined fractionally, while variable costs for RBD soybean oil users fell 2.1 percent. Crude-degummed users saw variable costs slip by 1.2 percent. Lower cost led to improved margins, which increased from $0.11 per gallon over variable costs to $0.24 per gallon for RBD soybean oil users.

Crude degummed soybean oil margins increased by 6.7 percent

Crude degummed soybean oil margins increased by 6.7 percent to $0.92 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, declined six cents to negative $0.24 per gallon for RBD and six cents to $0.52 for crude degummed soybean oil users.

The average weekly crude degummed soybean oil price is 13 percent below the recent high reached in April, while the average weekly biodiesel price is six percent below recent highs. RBD soybean oil pricing is 14 percent below the April high and the premium being paid for RBD edged lower relative to crude-degummed last week.

The spread in pricing between RBD soybean oil and crude-degummed fell back below 10 cents last week. It had been below nine cents in recent weeks, reaching its lowest point since September of 2021, but started to rise again following the October NOPA stocks report.

Prior to April 2021, RBD soybean oil generally averaged a price premium of about three cents per pound over crude degummed. The rise in renewable diesel capacity caused RBD soybean oil prices to increase rapidly due to supply concerns for refined soybean oil. This caused the spread between RBD and crude-degummed to expand. The spread climbed as high as 25 cents but narrowed to 8.5 cents in recent weeks following a projected increase in refined capacity.

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