New system of subsidies for biodiesel production in the US has brought down soybean oil prices

On April 30, the US Treasury Department and the Internal Revenue Service released updated guidance on the Sustainable Agriculture Fuel (SAF) tax credit. Soy biodiesel will now be eligible if producers use no-till and cover crops.

The calculation of greenhouse gas emission reductions is based on the latest model of the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) adopted by the International Civil Aviation Organization and used in Europe. Representatives of the US agricultural sector and the biofuel industry have criticized the use of the European CORSIA model for failing to take into account the US agricultural experience and prevent the participation of crop-based fuels in the SAF market.

the July futures for soybean oil on the Chicago stock exchange this week fell by 5.6% to 949 $/t (-13.2% for the month) amid increased supply of soybeans and oil from South America and a new system of calculation of subsidies for biodiesel.

According to the EIA, in February, the use of soybean oil for biodiesel production decreased compared to January by 8.1% to 1,955 million tons, which is the lowest monthly figure since December 2022.

the Decline in oil prices amid a possible truce between Israel and Hamas increases the pressure on the quotations of soybean oil and other vegetable oils, as the parties have almost agreed to release the hostages and the end of hostilities in the conflict.

Yesterday’s economic news from the United States was worse than expected, which affected oil prices. The Conference Board’s consumer confidence index fell by 6.1 to a 21-month low of 97.0 in April, while expectations were for 104. The MNI Chicago PMI fell by 3.5 to 37.9, while expectations were for a rise to 45.0, the biggest drop in 17 months.

June futures for Brent crude oil on the London ICE Futures exchange this week fell by 1.9% to $87.86 per barrel (+0.4% for the month).

Prices for canola and canola oil, which is also used in the production of biodiesel in the United States, fell after prices for soybean oil. the July canola futures in Chicago this week fell by 2.6% to 618 CAD/t or 448,5 $/t (-4.5% for the week, -4% for the month), which increased pressure on prices in Europe, where yesterday the August futures for canola fell by 1.5% to 458,25 €/t or 488,3 $/t.

Today is a day off in Malaysia and Europe, so we will see the reaction of the markets and the decline in prices for rapeseed and palm oil on Thursday.

Tags: soybean oil, prices, USA