As of March 4, 2025, the global biofuels landscape continues to evolve amid geopolitical tensions, regulatory uncertainty, and fluctuating feedstock prices. The soybean oil carry (contango) has been remarkably large to September at $18/mt, with 61% of it to May, indicating market expectations for the most depressing conditions for Biodiesel/RD in the US to occur in the next two months as traders hope for a resolution to the 45Z Clean Fuel Production Credit uncertainty. Today's retaliatory tariff announcements from China, Canada, and Mexico in response to US measures have intensified market concerns, with China implementing 10-15% tariffs on US agricultural imports, including soybeans, corn, and wheat, starting March 10. This escalating trade war will likely increase pressure on US policymakers to bolster domestic agricultural demand as exports take a significant hit.
European biodiesel markets showed active trading today, particularly in Fame 0 and UCOME, with flat prices reaching higher at $1,245/mt and $1,466/mt respectively. The EU's adoption of similar customs regulations to the US regarding animal fat content in UCO appears to be supporting UCOME prices but will likely drive feedstock prices higher as well. Current gross margins remain healthy with Fame 0 at $111/mt and UCOME still at an impressive $243/mt contrasting with a global squeeze on Biodiesel margins and negative 35c/gal biodiesel screen crush in the US. Meanwhile, ICE Gasoil has been relatively subdued considering the market turmoil following tariff announcements, but if we consider Cotton's behavior—down almost one full standard deviation—we should anticipate further weakness in Gasoil given their strong correlation. The BOGO (Bean Oil-Gas Oil) spread has taken a substantial hit today, reaching +$286/mt and widening its differential with Fame 0 and UCOME to +$288/mt and $495/mt respectively.
Regulatory developments continue to influence regional market dynamics. British Columbia announced changes to its Low Carbon Fuels Standard that will require eligible renewable fuels to be produced in Canada, boosting renewable content requirements for diesel from 4% to 8% beginning with the 2025 compliance period. In the European Union, Commission President Ursula von der Leyen promised "more flexibility" on CO2 targets for automakers while maintaining agreed emission reduction goals—proposing three-year compliance periods instead of annual ones. This approach could delay Europe's electric vehicle rollout, potentially affecting biofuel demand in the transportation sector. The biofuels industry has expressed disappointment that recent EU automotive industrial action plans have neglected to mention low-carbon biofuels and hydrogen.
In the advanced biofuels space, the differential between HVO Class II and SAF (Sustainable Aviation Fuel) is widening to nearly $80/mt premium for SAF, whose flat price currently stands at $1,780/mt. The contrast with conventional jet fuel is even more striking—at $675/mt in Europe, SAF commands a premium of $1,105/mt over conventional A1 jet fuel. Looking at the Asian market, Thailand recently completed its first B24 bunker delivery, joining Malaysia and Singapore in the marine biofuel space. Chinese domestic feedstock markets are seeing higher collection costs for UCO at ¥7,200-7,350/ton delivered with VAT, as several cargoes are expected to load by month-end. Global biodiesel margins are under pressure following VLSFO price declines and concurrent hikes in UCO methyl ester prices.
According to recent data from Oil World, global soya meal usage is projected to reach a record 275.3 million tons this season, up 15.8 million tons year-over-year, driven by relatively low soya meal prices and insufficient supplies of alternative feed ingredients. This increased demand is predominantly coming from the EU-27, China, and the USA, which collectively account for approximately 55% of global consumption. Significantly, South America is experiencing particularly strong growth in crushing activities to meet this meal demand, which will inevitably lead to increased soybean oil production. This additional oil supply will likely flow into the biodiesel sector, potentially pressuring biodiesel prices in the medium term despite current strength in vegetable oil markets. Brazil's projected soybean crushings of 57.6 million tons in 2025 (up from 55.8 million tons in 2024) and Argentina's expected jump to 44.3 million tons in Sept/Aug 2024/25 (compared to 34.4 million tons a year earlier) highlight this trend.
USDA projections indicate US soybean exports are forecast to decline by 5 million tons to 17.1 million tons in Jan/Aug 2025, while Brazilian soybean exports are expected to reach a record 86.2 million tons in the same period. We're already seeing signs of pressure specifically in Brazilian soybean oil FOB premiums, which are weakening significantly with bids for May/June soybean oil reaching $0.03/lb under Chicago soybean oil futures (negative 300 points). The Brazilian government's recent decision to suspend its planned increase in biodiesel blending from 14% to 15% (originally scheduled for March) further complicates the soybean oil supply picture, as more Brazilian soybean oil will now be available for export rather than domestic biodiesel production. These market fundamentals, combined with the UCO market firming (with cif ARA prices up $20/ton) despite the expected influx of approximately 70,000 tons from China in the coming weeks, suggest a period of continued volatility and strategic repositioning across the global biofuels industry as we navigate through the regulatory and trade uncertainties of 2025.
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