Soybean oil-based biodiesel margins remain strong

Midwest biodiesel margins continue to hold adjacent to near-term highs. Biodiesel prices have remained solid while there has been some falloff in soybean oil cost.

Upper Midwest B100 prices averaged $7.46 per gallon last week, down from $7.60 the week prior. Soybean oil crude degummed prices in Central Il averaged 84.11 cents per pound, a two percent decline from the prior week, and crude glycerin prices were edged two percent lower to 18.5 cents per pound. Biodiesel revenue increased six percent week over week, while variable costs climbed five percent.

The biodiesel margin improved one percent from last week to 91 cents per gallon over variable costs, which includes a 25 cents per gallon estimate for “other variables” beyond soybean oil, natural gas, and methanol. The overall margin, which includes fixed costs, also increased one percent and is 56 cents per gallon above the break-even mark for the week.

A month-over-month comparison shows biodiesel prices unchanged but reveals a 10 percent decline in soybean oil costs. Falling feedstock prices have improved the margin over the past few weeks.

Crude soybean oil futures at the Chicago Board of Trade have increased from 56 cents per pound at the beginning of the year to 87.65 cents per pound in April. Prices have started to abate, while biodiesel prices have experienced a slower decline.

The bean oil/heating oil spread (BOHO) measures the profitability of producing biodiesel from soybean oil. The higher the spread, the more costly the production. As the spread declines, RIN values generally lower in response to reduced production costs.

The value of the BOHO spread on Thursday, May 26, was five percent below the prior week, and the 2022 biodiesel RIN also fell five percent to $1.169½ per gallon. ULSD prices were five percent higher week on week, while crude soybean oil futures at the Chicago Board of Trade increased one percent.

Biodiesel production based on soybean oil increasing

Biodiesel producers using soybean oil as a feedstock are seeing margins covering both variable and fixed costs. According to EPA moderated transaction data for the renewable fuel standard program, US domestic biodiesel production increased by six percent in April. This improvement occurred with margins that were not as strong as they have recently been. May biodiesel production is likely to be well above April’s.

Soybean oil futures have been struggling against resistance around 84 cents per pound. Soybean oil futures appear to be heading toward a sub 80 cents per pound close this week. Prices are trending above the 14-day moving average and have been quite volatile in recent weeks. Soybean oil price support is seen at around 71 cents per pound, and prices could remain range-bound between 71 and 83 cents in the near term.