EU soyoil prices plummet on sharply lower CME, ample supplies

2 Dec 2022 | Sharon Levrez

European soyoil prices plummeted Friday after the soybean complex on the CME collapsed Thursday following an EPA report that lifted biomass-based diesel blending mandates in the US, while ample supply was seen in the market.

Soyoil FCA was quoted at €1,375/mt for February-April, down from €1,470/mt Thursday, while for May-July it was quoted at €1,340/mt, down €100/mt on the day.

“It’s bigger stocks and dismay over the EPA report,” one European broker commented, noting that the 6,83 cent/pound (c/lb) drop in December soybean oil futures Thursday was the equivalent of $150/mt.

Chicago soybean oil prices suffered heavy losses Thursday after news outlets published the latest US biofuel blending mandates based on confidential sources, pre-empting an official release by the US Environmental Protection Agency later in the day.

The early reports proved correct with the EPA recommending lifting biomass-based diesel blending mandates from this year's 2.76 billion gallons (gal) to 2.82 billion in 2023, 2.89 billion gal in 2024 and 2.95 billion gal in 2025

According to the US-based brokerage, Futures International, most traders were looking for a 1.0-1.5 billion gal increase for 2023 with 2024 expected to grow to 21.87 billion gal and 2025 to increase by 22.68 billion gal.

“Traders interpreted the mandates is different ways. The food industry did chalk up a win. Some thought it was bearish for soybean oil futures while others thought it had little impact on the US soybean oil balance sheet and/or USDA 2022-23 soybean crush estimate,” said senior grain and oilseed commodity analyst at Futures International Terry Reilly in his morning report Thursday.

“There is a chance SBO for biofuel use could fall short of expectations because of the large RIN pool. With mandates lower than expected, that means there are less mandates needed to buy, which could in turn pressure RIN prices, thus squeezing biofuel producer margins.”

Renewable Identification Numbers (RINs), which are considered the currency of compliance, are generated on a gallon of renewable fuel produced at an EPA approved production facility, including ethanol, biodiesel, renewable diesel and other advanced biofuels.

CME soybean oil futures were meanwhile trading lower still Friday, with December down 1.21% at 67.57 c/lb and January down 3% at 65.16 c/lb at the time of publication.