Nomination of Lee Zeldin to EPA sends chills on Soyoil down one standard deviation today as he was a supporter of an RFS rewrite. However, this nomination hides the reality that it is the IRA (Inflation Reduction Act) that is more the theme for 2025 as we embark on the Clean Fuel Production Credit (CFPC). There are a number of uncertainties as we close out 2024 with 40A $1 per gallon fixed credit and 40B $1.25 per gallon incentive (total $2.25/gallon or $793/mt). The new 45z rule will only provide $1.75 per gallon or $616/mt) depending on what is the carbon intensity of the feedstock you are using, pushing RD/HVO producers away from crop-based vegetable oils. It should be noted that the BTC that expires this year has not been renewed for 2025 at this moment leaving producers with additional uncertainties. BTC could be introduced during the lame-duck session, but considering the revenue pressures, it is highly unlikely. One other item that is more concerning for producers overseas is that the CFPC is not available to foreign producers - this will impact many significant plants overseas and particularly Singapore based producers. The additional lack of guidance on which Carbon intensity model is to be used for 45z adds to the overall climate of uncertainties. This will for sure put a damper on feedstock sourcing particularly for foreign producers who will have to rely on RINs incentives only as we hear more rumors from the market already of roll-overs and cancellations. Considering the level of US biodiesel imports approx 150kt/mth, you can predict a significant impact on international feedstock prices in the next few months as foreign producers adjust to the new reality while US domestic producers also adjust to replace imports.
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