RBD soybean oil trading on 10-cent premium to crude degummed

The average weekly biodiesel price held steady last week, while glycerin and soybean oil values declined. Biodiesel prices have moved higher in one of the past 22 weeks, but margins have remained relatively healthy due to lower feedstock costs.

The weekly average soybean oil price fell 1.7 percent for RBD and 2.2 percent for crude degummed soybean oil (CDSO). RBD pricing is 1.7 percent below month-ago levels, while CDSO is 3.3 percent lower. Biodiesel prices are down 4.6 percent from a month ago.

The price spread between RBD soybean oil and crude degummed soybean oil edged fractionally higher last week. The RBD average weekly price declined 1.1 cents per pound to 66.40, while the average CDSO’s price fell 1.2 cents to 56.30 cents per pound in Central IL.

How the spread trends

RBD currently carries a 10.1 cents per pound premium to CDSO, and the spread is at a 13-week high. The RBD-CDSO spread continues to trade in a narrow range with an upper limit of 11 cents vs a lower limit of 8.2 cents and remains in a downward trend since June 2022.

Prior to April 2021, the RBD soybean oil premium to crude degummed averaged approximately three cents per pound. Increasing renewable diesel capacity lifted demand for RBD soybean oil relative to crude-degummed, causing RBD supply concerns due to limited crushing capacity. This enabled the RBD-CDSO spread to widen. The spread has been as high as 25 cents but narrowed in recent months following a projected increase in refining capacity and the EPA setting RVOs lower than the market anticipated.

Reports from the Energy Information Administration show renewable diesel producers have been using more soybean oil as feedstock lately and RBD soybean oil is a preferred feedstock for many producers.

Glycerin, a co-product of biodiesel production, had spot prices quickly dropped several weeks ago and values continue to hold in the lower range. There remains a certain amount of volatility within the glycerin market, but an oversupplied situation is keeping pricing in check. Natural gas prices and methanol held steady this week.

Biodiesel revenue was unchanged at $5.523 per gallon, while variable costs for RBD soybean oil users fell 1.5 percent from $5.52 to $5.43 per gallon. The margin over variable cost for RBD soybean oil improved from one cent per gallon to nine cents.

Variable costs include a 25 cents per gallon estimate for “other variables” beyond soybean oil, natural gas, and methanol. Total costs include an assumption of 35 cents a gallon, which may not pertain to all facilities; actual costs could be significantly lower.

Variable costs for CDSO users dropped 1.9 percent from $4.78 to $4.68 per gallon. With revenue holding steady and costs moving lower, the CDSO margins over variable and fixed costs improved. The margin above variable cost and total cost declined 12 percent and 23 percent from the margin indication the week before.

EPA monthly consumption data shows that domestic biodiesel and renewable diesel production has fallen 21 percent and six percent, respectively, from December. The possibility of RVOs being revised higher could provide additional demand if the EPA decides to increase mandates from the proposed levels, as some participants believe might happen. EPA March consumption data will be released later this week.

Volatility is likely to remain within the soybean oil market due to additional demand projections from renewable diesel producers. Renewable diesel demand is forecast to more than double over the next two years. Geo-political tensions continue to impact commodity market volatility in general.