ADM causes panic in US soybean market ahead of new biofuel rules

Archer-Daniels-Midland (ADM), a major U.S. soybean processor and biofuel producer, sharply cut its soybean purchase prices this week ahead of an expected announcement by the Trump administration on biofuel blending requirements, a key driver of soybean oil demand. Processors such as Chicago-based ADM have been waiting months for a decision from the U.S. Environmental Protection Agency (EPA), grappling with shrinking processing margins and a soybean glut.

Reuters reported on Thursday that the EPA is likely to propose biofuel blending requirements lower than industry recommendations, leading to lower-than-expected demand for soybean oil for biofuels. ADM said it had no further information about the upcoming announcement beyond what was publicly available and that it sets its own benchmark rates, which reflect the difference between futures and the local cash price for immediate delivery of the beans.

ADM on Wednesday changed the base rate at its key plant in Decatur, Illinois, from 22 cents above July futures on the Chicago Board of Trade to 20 cents below November futures. The change pushed the local cash price down about 60 cents a bushel, an unusually sharp 6.5% drop for farmers. Other processors, including Cargill, followed ADM on Thursday, while some lowered their base rates to as much as 15 cents, keeping them pegged to July futures.

The decline in base rates reflects expectations of a large fall crop and weak demand, which is eroding processing margins for companies that produce soybean meal for animal feed and soybean oil for cooking and biofuels. The increase in U.S. processing capacity has added pressure to soybean prices, while uncertainty over tariffs and biofuel policies has heightened concerns among processors and biodiesel producers, some of whom have scaled back or suspended operations.

“ADM in Decatur has caused panic in the soybean market,” said John Stewart and Associates, a trading firm. Diana Klemme of Grain Service Corp in Atlanta, which works with agricultural hedgers, said that in more than 50 years in the grain business, she has never seen a transition to new crop baselines in June. In April, ADM announced the closure of a soybean processing plant in South Carolina to cut costs, underscoring the difficult situation in the industry.

Tags: prices, soybean, USA