A new system of subsidies for the production of biodiesel in the United States has caused soybean oil prices to collapse

The U.S. Department of the Treasury and the Internal Revenue Service released updated guidance on the Sustainable Fuels (SAF) tax credit on April 30. Soy biodiesel will now meet the requirements provided producers use zero tillage and cover crops.

The calculation of greenhouse gas emission reductions is based on the use of the latest model of the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) adopted by the International Civil Aviation Organization, which is used in Europe. Representatives of the US agricultural sector and the biofuels industry have criticized the use of the European CORSIA model for failing to take into account US agricultural experience and to prevent the participation of crop-based fuels in the SAF market.

July soybean oil futures on the Chicago Stock Exchange fell 5.6% to $949/t this week (-13.2% on the month) amid increased supply of soybeans and oil from South America and a new system for calculating biodiesel subsidies .

According to the EIA, in February the use of soybean oil for the production of biodiesel decreased by 8.1% compared to January to 1.955 million tons, which is the lowest monthly figure since December 2022.

A drop in oil prices amid a possible truce between Israel and Hamas is putting pressure on soybean and other vegetable oil prices as the two sides come close to agreeing to release hostages and end hostilities in the conflict.

Yesterday's economic news from the US turned out to be worse than expected, which weighed on oil prices. The Conference Board's consumer confidence index fell 6.1 in April to a 21-month low of 97.0 against expectations of 104. MNI's Chicago PMI fell 3.5 to 37.9 against expectations of a rise to 45.0, the biggest the decline of the last 17 months.

June futures for Brent oil on the London ICE Futures exchange this week fell by 1.9% to $87.86/barrel (+0.4% for the month).

Prices for canola and canola oil, which is also used in biodiesel production in the US, fell in line with soybean oil prices. July canola futures in Chicago fell 2.6% this week to CAD 618/t or $448.5/t (-4.5% weekly, -4% monthly), adding to pressure on prices in Europe, where yesterday August rapeseed futures fell by 1.5% to €458.25/t or $488.3/t.

Today is a holiday in Malaysia and Europe, so we will see the reaction of the markets and the decrease in prices for rapeseed and palm oil already on Thursday.