Biodiesel prices in the US have risen sharply due to a possible reduction in supplies of raw materials, but the future outlook is still unclear

Biodiesel prices in the US rose sharply last week after several weeks of stability, under pressure from various factors affecting the supply and demand dynamics of biodiesel in the market.

According to ChemAnalyst analysts, US UCO CFR Houston biodiesel prices rose by 1.3% to $1,545/t in the period from November 16 to 22 due to increased shortage of raw materials on the domestic market. The constant increase in the price of soybeans, the raw material for biofuel, also affected the cost of production.

Soybean oil net sales rose 33% from the previous week, but were 48% below the previous 4-week average. Strengthening demand for soybean oil against the background of moderate supply has led to an increase in prices for soybean oil and, accordingly, for biofuels.

At the same time, the potentially unfavorable government policy for biofuel producers increased optimism in the market. Intentions of American lawmakers to continue significant incentives for the biofuel industry met with strong resistance in the Senate. The tax breaks expire in December, so now biodiesel producers are under pressure.

After the end of the tax benefits, the margin of mixing biofuel with conventional fuels may increase. A possible increase in production costs worsened market sentiment. Legislators in farm states are trying to continue supporting the industry, which considers them important to the agricultural economy, especially related to the cultivation of soybeans. It will also have a radical impact on the soybean processing industry. At the same time, the authorities have other priorities - state funding, federal debt and others, so the promotion of the biofuel industry may take a back seat, which will upset the voters.

In the near term, the biodiesel market will remain uncertain due to opposition to the extension of tax incentives and fluctuating supply and demand dynamics. The future of the industry and biodiesel prices will depend on the tax policies of the new Congress.