Chicago soyoil oil falls 7% amid uncertainty over US biodiesel policy

Chicago soyoil futures have fallen by around 7% over the past week amid uncertainty over the future direction of US biofuel policy. Expectations of higher biodiesel production and restrictions on the use of imported vegetable oils and used cooking oil had previously been among the key factors supporting prices.

December soyoil futures rose 6.4% between August 1 and August 20, but fell to $1,491/t by August 26. Prices are down 2.7% since the beginning of the month, although they remain 30% higher year-on-year.

Pressure on the market intensified after the US Environmental Protection Agency (EPA) decided to extend beyond September 1 the deadline for refiners to demonstrate compliance with their 2025 Renewable Fuel Standard obligations. The duration of the extension has yet to be finalized.

In addition, the EPA is expected to decide by the end of August on small refinery exemption requests. This could potentially release 1.2–1.8 billion RIN credits and increase their availability. Against this backdrop, biomass-based diesel credits fell to $1.92 on August 24, their lowest level since April.

Lower RIN credit prices could weaken physical demand for biofuels and, consequently, for soyoil as a feedstock. At the same time, high crude oil prices continue to support the market, meaning further price dynamics will largely depend on final US decisions on biofuel policy.

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