Oil prices fell by 2.8% after the US decision to increase the share of vegetable oils in fuel by only 1%

The decision by the US Environmental Protection Agency (EPA) to increase the share of biofuel use in 2023-25 by only 1% disappointed traders, as a result of which quotations for soybeans and canola fell by 2.4-2.8%, and soybean oil by 6.8%.

Thus, the ERA increased the mandatory use of biofuel from 78.09 billion liters by 1% to 78.8 billion liters in 2023, of which 22 billion liters will be modern biofuel (mainly soybean oil). In 2024, the share of biofuel will grow by 5% to 82.79 billion liters, and in 202 - by another 3.7% to 85.85 billion liters.

The target for traditional corn ethanol remains unchanged at 56.8 billion liters in 2023, and will increase to 57.7 billion liters in 2024 and 2025.

The target for modern biofuels, which includes biodiesel and renewable diesel, as well as other products meeting the requirements for reducing greenhouse gas emissions, will increase from 22 billion liters in 2023 to 28.13 billion liters in 2025.

The approval of canola oil in modern biofuels under the Renewable Fuel Standard (RFS) program in the US sent soybeans and soybean oil prices down, even as refining volumes rose 17% in October.

Recall that the EPA approved canola oil as a feedstock for renewable diesel fuel, jet fuel and other biofuels under the RFS program, as greenhouse gas emissions from canola oil-derived fuel significantly exceed the 50% reduction threshold compared to fossil fuels.

It is difficult to predict how the ERA decision will change the demand for canola, but Canada will significantly increase canola oil processing in 2023-25, which will reduce canola exports, especially to China, which, although not stable, buys large batches of Canadian canola.

January soybean oil futures in Chicago fell 6.8% to $1,485/t yesterday, having lost 8.3% for the week, despite a 17.3% increase in US soybean processing in October compared to September to 5.35 million tons, which is only 0.8% less than the record figure.

January soybean futures yesterday fell by 2.8% to $525.4/t.

January canola futures on the Winnipeg exchange fell 3.7% to CAD 815/t or $606/t yesterday, losing 9.8% for the month.

February canola futures on Paris Euronext yesterday also fell 2.4% or €14.25/t to €585.5/t or $616/t under pressure from lower soybean and soybean oil prices as it soon to lower rapeseed oil prices.