New US biodiesel policy could raise soybean oil prices, spur crushing

The global soybean oil market could undergo a turnaround following changes proposed by the United States government to the biodiesel mandate. According to the June Monthly Agro Bulletin from Itaú BBA's Agro Consulting, the United States is moving towards expanding the mandatory blend of biofuels, in addition to restricting the use of imported raw materials, measures that should stimulate domestic demand for soybean oil and favor crushing.

Photo: Disclosure/OPR Archive

The proposal calls for blending mandates to no longer be presented in volumes but instead in RINs (Renewable Identification Numbers), certificates assigned to each gallon of biofuel produced and used for transportation. Under the new rule, biofuels made from imported raw materials, such as used cooking oil from China or beef tallow from Brazil, would generate only half the amount of RINs compared to those made from local inputs.

If the project is approved, the scenario points to an increase in soybean oil prices and, as a consequence, greater profitability for the crushing industry in the United States. With the expectation of more attractive margins, the sector should intensify soybean processing next year.

In Argentina, the focus remains on producers rushing to sell soybeans before the full rate of retenciones (export tax) is reinstated. Until the end of June, farmers are taking advantage of the temporary reduction in the rate to 26%, a level that will revert to 33% on the 30th. The pace of sales is strong: around five million tons have already been sold this month, representing almost 10% of the harvest. The expectation is that, with the end of the benefit for soybeans, corn sales will gain traction in the neighboring country.

These movements in the two main players in South and North America put soybean oil at the center of attention in the grain market, with potential repercussions on prices and the global balance between supply and demand.