Prices for US biofuel feedstocks have risen sharply since the US Environmental Protection Agency (EPA) late last week proposed ambitious biofuel blending targets for the next two years along with lower incentives for using foreign feedstocks.
Futures prices for soybean oil, the most widely used input for biodiesel production, have led the feedstock gains as the market prices in potentially higher demand. The Nymex front-month contract for soybean oil rose by 6.3pc on 13 June and by an additional 7.8pc on Monday to 54.6¢/lb, the highest since October 2023.
The proposed targets, released on 13 June, would mandate that an equivalent amount of 5.61bn USG of biomass-based diesel be blended in 2026 and 5.86bn USG in 2027. The proposed volumes exceeded most market expectations and industry requests of 5.25bn USG and were significantly higher than the current-year mandate of 3.35bn USG, fueling expectations for increased biofuel feedstocks demand.
In addition, domestic feedstocks may face reduced competition from foreign feedstocks under the proposal, which would cut federal Renewable Identification Number (RIN) credit generation by 50pc for imported biofuels or fuels produced from foreign feedstocks.
Biomass-based diesel D4 RINs for the current year rallied Monday morning, trading between 127-132¢/RIN, up significantly from Friday's close of 109¢/RIN.
Used cooking oil (UCO) railcar volumes to the US Gulf coast were reported trading at 59¢/lb early Monday morning, a 3.5pc jump from Friday's closing price of 57¢/lb, with additional selling interest emerging in the 60s¢/lb.
UCO offers for volumes into California were noted in the high 60s¢/lb, up from last week's close in the high 50s¢/lb.
Distillers corn oil (DCO) fob truck volumes in the Midwest traded at 61¢/lb on Monday morning, reflecting a 9pc jump from Friday's close of 56¢/lb.
Poultry fat fob truck volumes in the southeast were offered in the low 50s¢/lb, up from last week's closing levels in the low 40s¢/lb, but buying interest has not emerged at those levels.
Activity for other renewable feedstocks remains limited for now, but market participants anticipate increased trading later this week, driven by the recent proposal and gains in futures markets.
The EPA proposal is currently in an open comment period, with a public hearing scheduled for 8 July.
