Despite a record crush of over 200 million bushels (5.4 million MT), the trade was expecting 204 million bushels. I think January would not be the month where we would see the greatest decrease in biodiesel and RD demand in the US, but later in the quarter—data is usually a rearview mirror. CVR's latest announcement on curtailing their RD operations to 66% of last year's throughput is another example of what is going on in the US. Additionally, CVR Energy has paused their SAF project.
As stated many times previously, I believe the slowdown in biodiesel and RD is real and will have a continuing serious impact on demand, especially in Q1 2025. This weakness is becoming increasingly evident in the HVO market, where Class II premiums have fallen to their lowest levels since October 2024 amid ample supply. Seasonality plays an important role in soybean oil stocks, so I would not make a huge deal out of this Feb 18 NOPA report as the screen crush margin for soybean is still near $46/MT, so we clearly have run away too far on pricing.
D4 RINs still at 90 c/gal remain to do a lot of work as the screen crush margin for biodiesel is still negative 17 c/gal today and expanding with carry in May to negative 33 c/gal. No one is locking such margins :). The softening biofuel demand picture isn't limited to the US - Brazil has just decided to maintain rather than increase its biodiesel blend at 14%, citing concerns over high diesel prices and a 29% surge in soybean oil prices in 2024. AgroConsult also telling the world that Brazil harvest could be in excess of 170 Mil MT.
In other important regulatory news in the US, CARB has been told by OAL to postpone the implementation of the new LCFS rules (lowering crop-based biofuels in general) in their new models starting in 2028. Meanwhile, in Europe, the northwest corridor remains very quiet ahead of German elections this weekend. RME is trading at a very healthy $1275/MT, reflecting a $120/MT gross margin, while FAME0 is trading at $1236/MT, also showing a very good gross margin at $122/MT.
Gasoil strength has been helpful to Biodiesel in Europe, up $30/MT in the last few weeks, yet the heat screen crack is still over $30/brl, so I would not hold my breath on diesel as once Russian end-of-winter exports flow in April, it could have a hard landing. Adding to the bearish sentiment, Indian refiners have just cancelled around 70,000 MT of palm oil orders scheduled for March-June delivery, citing negative refining margins and high prices.
In other news, palm traders headed to KL for the annual POC meeting, and as usual, we see palm rallying and taking BOPO negative once again. I think this rally still has some legs but is nearing a sell, particularly given the significant decline in Indonesia's palm exports so far in 2025, with January exports to key markets like India and China falling by 43.65% and 77% respectively.
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