Chicago soybean oil prices surge ahead of biofuels loan decision

Uncertainty over the Trump administration's policy to support biofuel production continues to sway soybean oil quotes in Chicago.

 

December soybean oil futures on SWOT fell by 3.7% the day before yesterday, and yesterday rose by 4.7% to $1,187/t, which is 2.8% lower than last month's level.

 

The Trump administration will rule on Friday on requests from small refiners seeking relief from U.S. biofuels regulations, but will delay a decision on whether large refiners should compensate by increasing their own biofuel blending, Reuters reported.

 

The U.S. Environmental Protection Agency will announce decisions on Friday on some of the 195 pending requests for exemptions from small refineries that date back to 2016, sources said. The decisions will not be a clear victory for small refiners and will include some partial denials of exemptions.

 

The administration is also expected to issue a supplemental rule as soon as next week to invite public input on whether large refineries should compensate for exempt gallons in a process known as reallocation, the source said.

 

How the administration handles requests for exceptions and redistribution issues will have implications for the oil and agricultural industries, and will affect the prices of commodities, from gasoline and renewable diesel to soybeans and corn, and the companies that produce them.

 

In the past, widespread non-redistribution exemptions have driven down the prices of renewable energy blending credits, negatively impacting the prices of corn-based ethanol and soy-based biofuels. But so far, the U.S. Environmental Protection Agency (EPA) and the White House have not commented on the situation.

 

The U.S. Renewable Fuel Standard requires refiners to blend biofuels, such as ethanol, into a fuel pool or through trade credits, known as RINs, from refiners that do so. Small refiners can petition the EPA for an exemption if they have a demonstrated financial hardship.

 

The EPA has already had a backlog of such requests for several years, the result of political indecision and legal wrangling between several administrations. Both the agricultural and oil industries are eager for a solution to the problem.

 

The oil industry strongly opposes redistribution, arguing that it creates an uneven playing field and imposes burdensome regulatory costs.

 

Earlier this year, the EPA said it would force larger refineries to offset future gallon exemptions, but did not specify how it would handle gallon exemptions from dozens of backlogged requests.

 

Falling soybean oil prices are putting pressure on palm oil quotes, with October palm oil futures on Bursa Malaysia falling 2.2% to 4,460 ringgit/t or $1,057/t since Monday, but still trading 4.8% higher than two weeks ago.