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Key takeaways:
Prices for key biofuel feedstocks moved higher throughout the session. Fastmarkets assessed tallow, max 20% ffa, del US Gulf at 60-62 cents per lb on Thursday, widening upward from 60 cents per lb on Wednesday, while bleachable fancy tallow, delivered California was assessed at 61-62 cents per lb, up from 55-57 cents per lb.
Elsewhere, edible tallow, fob Chicago was assessed up on the day at 60 cents per lb from 56.50 cents per lb on Wednesday, based on a two-railcar trade concluded at that level.
Technical tallow, fob Chicago also moved higher to 59-60 cents per lb, with sufficient railcar volumes trading at both ends of the range throughout the day, raising the assessment from 56 cents per lb previously.
Distiller’s corn oil (DCO) saw similar upward moves nearly across the board, with distiller’s corn oil, delivered US Gulf assessed at 66-67 cents per lb, up from 64.50 cents per lb on Wednesday, with offers heard as high as 68 cents per lb during the session.
Distiller’s corn oil, delivered Northern California was assessed at 68-70 cents per lb on Thursday, up from 66.00-67.75 cents per lb, with late-session offers reaching 70.50 cents per lb.
In the FOB Midwest markets, DCO prices were assessed 2-5 cents per lb higher on Thursday, with most values settling at 63-65 cents per lb amid thin liquidity and increasingly bullish sentiment.
Overall, market participants described the feedstock complex as “on fire,” with price gains accelerating as the session progressed.
Market strength was widely attributed to reports that the Environmental Protection Agency (EPA) is poised to reallocate at least 50% of previously waived Small Refinery Exemption (SRE) volumes under the Renewable Fuel Standard (RFS), a move seen as materially supportive for biofuel blending demand and Renewable Identification Number (RIN) values.
The development follows news that proposed 2026 Renewable Volume Obligations (RVOs) have been sent to the White House Office of Management and Budget (OMB), heightening anticipation of formal rulemaking before the end of March.
Under the RFS, refiners must blend renewable fuels or purchase RINs to comply. In recent years, more than 2 billion gallons of blending obligations were waived through the SRE program for compliance years 2023 through 2025.
Reallocating at least 50% of those volumes would effectively reintroduce a substantial portion of those obligations into the compliance system – equating to roughly 1 billion gallons on a proportional basis.
Whether those waived volumes would be redistributed to other refiners has been a longstanding point of tension between the refining and biofuel industries. Biofuel advocates had pushed for full reallocation of exempted gallons, while refiners warned that shifting those obligations would increase compliance costs for larger facilities.
Reports that the EPA may reallocate at least 50% are widely viewed as a compromise outcome. While several market participants said 50% had been broadly expected, confirmation at that level effectively removes downside risk that the agency might have opted for a 0-25% reallocation scenario.
“What this did was eliminate uncertainty,” one trader said. “The market was still pricing in some downside risk. Once that risk came off the table, RINs bolted higher. It’s an old-fashioned relief rally.”
D4 biomass-based diesel RINs climbed sharply on Thursday, with gains spilling over into soybean oil futures and other biofuel feedstocks.
Biodiesel, D4 biomass based diesel RINs, B26 climbed to a new high for the year, settling at 163.00-163.50 cents per RIN, up by 3.82% on the day and by nearly 22% since the start of February.
At the same time, the CBOT May 2026 soybean oil futures contract closed at 61.76 cents per lb, up by 1.80% from Wednesday’s 60.67 cents per lb and almost 15% higher month to date.
Market participants said the rally in RIN values has materially improved renewable diesel and biodiesel margins, increasing the theoretical bid that producers can justify for feedstocks such as tallow and distillers corn oil.
Stronger soybean oil futures have further reinforced upward price expectations, though elevated replacement costs and anticipation of additional pressure have slowed spot liquidity in some markets.
“We haven’t sold much,” another market participant said, citing patience amid fast-moving policy headlines and comfortable coverage through March. “There’s a sense that things may look expensive today but cheap in a month if these volumes come through.”
The focus now shifts beyond reallocation toward the forward trajectory of blending mandates. Market participants widely expect 2026 biomass-based diesel volumes in the range of 5.25 billion-5.40 billion gallons.
However, traders cautioned that 2027 targets will be equally critical, and failure to build on 2026 levels could prompt a correction after the recent rally, according to several sources.
For now, sentiment remains firmly supportive as markets digest the potential for increased blending obligations alongside stronger soybean oil, energy futures and compliance credit values.
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