Margins rise for biodiesel producers using soybean oil as a feedstock

Midwest biodiesel prices continued to edge higher last week, climbing nearly one percent and are 1.1 percent over levels from a month ago. Producers using RBD soybean oil as a feedstock saw margins rise as RBD soybean oil prices increased less than biodiesel.

Producers using crude degummed soybean oil oil also experienced an uptick in margins as the weekly average price for crude degummed feedstock edged lower.

The average weekly RBD soybean price in Central Il climbed 0.5 percent and was 6.7 percent over values seen a month ago. The average weekly crude degummed soybean oil price in Central Il declined fractionally and was 10 percent above values from a month ago.

Upper Midwest B100 prices averaged $6.89 per gallon last week, up from $6.844 the week prior.

Central IL RBD soybean oil prices averaged 85.87 cents per pound, up from 85.46 cents per pound. Crude degummed prices in Central Il slipped fractionally lower to 72.27 cents per pound, while the average weekly crude glycerin price fell 2.2 percent, with an average price for the week of 15.25 cents per pound.

The cost of methanol and natural gas was unchanged.

Biodiesel revenue increased 0.6 percent during the week, while variable costs for RBD soybean oil users were unchanged. Crude degummed feedstock users saw variable costs fall 0.2 percent due to reduced feedstock cost.

The biodiesel margin improved from $0.17 per gallon to $0.18 per gallon over variable costs for producers using RBD soybean oil. Producers using crude degummed soybean oil had margins increase from $1.13 to $1.19 per gallon over variable costs. Variable costs include a 25 cents per gallon estimate for “other variables” beyond soybean oil, natural gas, and methanol. The overall margin, which includes fixed costs, increased a penny to negative $0.17 per gallon for RBD users.

Crude soybean oil futures at the Chicago Board of Trade have been volatile this year, rising from 56 cents per pound in January to an intraday high of 87.65 cents per pound in April. The average weekly crude degummed soybean oil price is 18 percent below the April high, while the average weekly biodiesel price is eight percent lower during the same period. RBD soybean oil pricing is two percent below the April highs.

Bean oil/heating oil (BOHO) spread value

The bean oil/heating oil spread (BOHO) measures the profitability for producing biodiesel from soybean oil. The higher the spread, the more costly production. As the spread increases, RIN values generally rise. The opposite tends to be true when the BOHO moves lower. The BOHO calculation uses crude soybean oil futures disseminated daily by the Chicago Board of Trade.

The value of the BOHO spread on Friday, August 19, was $3.70 per gallon, five percent above the prior week. The 2022 biodiesel RIN was four percent lower at $1.74½ per gallon. ULSD futures increased five percent, while crude soybean oil futures at the Chicago Board of Trade were two percent lower.

Margins have benefitted from the stronger ultra-low sulfur diesel values, commonly referred to as heating oil (HO in the BOHO spread). Soybean oil prices reached 65.98 cents per pound last week before pulling back and settling at 65.36 cents per pound to close the week. Last week’s high was at the highest soybean oil price level since July.

Biodiesel producers able to use crude-degummed soybean oil as a feedstock are seeing margins covering both variable and fixed costs. Producers using RBD are only seeing margins above variable costs. U.S. Domestic biodiesel production increased two percent in June, according to EPA moderated transaction data for the renewable fuel standard program. Some vertically integrated producers speaking to Fastmarkets have indicated that rising biodiesel margins have caused them to increase biodiesel production.

Soybean oil futures have been attempting to move higher recently but are being met with resistance around the 66 cents per pound mark for the December soybean oil future at the Chicago Board of Trade. Prices closed above this level two weeks ago, failed to confirm another weekly close above 66 last week, and are testing resistance again this week. Soybean oil prices continue to trend below the 14-day moving average.

Soybean oil is the largest feedstock option for biodiesel production and is becoming a more significant option for renewable diesel production. Margins for producing biodiesel from soybean oil are currently the healthiest they have been in years. RBD soybean oil margins have been mostly profitable, despite the huge premium it trades at relative to crude degummed soybean oil. The larger spread for RBD is a relatively new phenomenon that came about in 2021 as additional future renewable diesel capacity was being announced.