Markets Whipsawed by Tariff Turnaround and USDA’s WASDE: A 90-Day Window into Uncertainty

Today’s biofuels market landscape is clouded by confusion and contradiction. While the USDA’s latest WASDE report offered few surprises, markets reacted more sharply to policy noise than to fundamental data. ICE Gasoil, typically a benchmark for biodiesel pricing, surged a full standard deviation following the announcement of a temporary relaxation of certain tariffs—despite tariffs on Chinese goods actually climbing to a staggering 145%. The equity markets and energy complex followed suit, perhaps in disbelief or denial, but this divergence between market sentiment and trade reality has left many biofuel traders bracing for a bumpy 90 days.

In Europe, the biodiesel spot market in the ARAG zone reflected strong physical support, especially for RME (rapeseed methyl ester), which rallied $42/mt to $1280/mt. FAME 0 also firmed to $1247/mt, while UCOME was trading around $1453/mt. These movements are significant, considering Rhine River navigation difficulties that continue to support barge premiums. Margins, however, tell a more nuanced story—RME showed a healthy gross margin of $151/mt, while FAME 0 trailed behind at $70/mt. These premiums remain well above ICE Gasoil monthly averages, pointing to logistic and seasonal constraints rather than broad demand recovery.

In the U.S., D4 RINs edged up to $1.06, reflecting tightening credit markets. Yet, this uptick offered little reprieve to biodiesel producers, as gross screen margins for biodiesel deteriorated further to -30 c/gal. Interestingly, soybean crush margins have recently improved on-screen, rising from $1.20 to $1.50 per bushel—counterintuitive in the current environment. With bean oil’s share of the crush value still hovering around 40%, the disconnect suggests that meal demand, not oil, is driving the margin. This raises broader questions about the sustainability of biodiesel margins, especially as small refiners sound alarms over the rising cost of RINs, which they view as a regulatory tax. Their concerns echo back to 2018, when Carl Icahn’s lobbying reshaped the RIN market. Meanwhile, Senator Grassley is pushing for higher RVOs, but without a functioning 45Z tax credit or new BTC clarity, higher mandates may only fuel further increases in RINs value.

On the international front, signs of trade paralysis are emerging. While some markets temporarily benefit from rerouted flows and shifting arbitrage, the broader impact of tariff escalations and retaliation, especially the dramatic increase in Chinese duties, is chilling. WASDE did not attempt to forecast the outcome of these new trade dynamics, consistent with its policy to only include formalized measures. Still, we can anticipate stalling trade routes and unclear price signals until the July 9 tariff pause expires or is extended.

Finally, it’s worth reiterating that the “additional 10% duty” now effective is ad valorem, meaning it applies on top of existing tariffs and scales with the invoice value—magnifying its impact beyond just 10%. In this environment, even minor disruptions are cascading through supply chains, especially for feedstocks like UCO and tallow, whose arbitrage values are under pressure. Expect volatility and margin compression as the industry navigates this politically charged terrain. Caution, not optimism, should guide us through the next quarter.