Soybean oil prices fall 4% amid possible reduction in demand from the biodiesel industry

The Chicago Stock Exchange was closed for Thanksgiving on Friday, so no one expected a price jump, but December soybean oil futures unexpectedly fell 4% to $1,134/t (-1% for the week, -1 .5% for the month), losing the growth of the previous week.

The reason for the collapse of quotations was the decision of the US Fifth Circuit Court of Appeals in favor of the Ergon, Calumet Shreveport and Placid oil refineries, which challenged the ERA decision. The court allowed small refiners not to buy biofuels for blending and not to buy tradable credits.

The court's 38-page ruling said the waiver requests rejected by the Environmental Protection Agency (EPA) were "impermissibly retroactive, inconsistent with the law and the available evidence."

Under the Renewable Fuel Standards (RFS), refiners must blend billions of gallons of biofuel into the nation's fuel balance or buy tradeable credits from those who do.

In July, the EPA rejected almost all of the pending petitions from refiners that alleged future financial hardships that would result from complying with the federal requirement to blend ethanol and other biofuels with fuel.

Increased demand for soybean oil from the biofuel industry in the US was the main factor supporting oil prices, which remain the most expensive on the world market for the second year in a row.

Palm oil on Bursa Malaysia also fell 1.55% to 3,890 ringgit/t or $831/t on Friday (-1% for the week, +5% for the month) amid a slowdown in exports.

From November 1-20, palm oil production fell by 3.89% from the same period in October, beating market expectations, according to the Malaysian Palm Oil Association, while palm oil exports, according to surveyors Intertek Testing Services, Societe Generale de Surveillance and AmSpec Agri Malaysia, down 2-9%.

India continues to reduce purchases of palm oil for delivery in December and January amid rising prices and negative refining margins that refiners received after heavy imports in recent months.

Experts at BMI Industry Research of Fitch Solutions predict that palm oil prices will reach 3,515 ringgit/t or $750/t in 2024, as the El Nino phenomenon may reduce palm oil production in Indonesia and Malaysia. But its impact on productivity will become clear in the second half of 2024.