Chicago Board of Trade soybean oil futures rose 7.22% over three trading sessions through Sept. 1 as the market reassessed US biofuel demand following the Environmental Protection Agency's latest small-refinery exemption decisions and its proposed treatment of the additional exempted volumes.

The most-liquid CBOT December soybean oil contract settled at 72.63 cents/lb on Sept. 1, up from 67.74 cents/lb on Aug. 26 — an increase of 4.89 cents/lb, or 7.22%.

EPA decisions and reallocation plan

On Aug. 31, the EPA announced decisions on 34 small-refinery exemption petitions for the 2025 Renewable Fuel Standard compliance year, granting 18 full exemptions and 11 partial exemptions, denying three, and determining two were ineligible. Together, the decisions represented approximately 1.76 billion exempted Renewable Identification Numbers.

Under the RFS, refiners and importers must meet annual Renewable Volume Obligations, demonstrating compliance through RINs attached to each gallon of renewable fuel blended. Small-refinery exemptions relieve qualifying plants of those obligations, effectively removing RIN demand — which is why the size of the exempted volumes, and whether they are reallocated to other obligated parties, matters directly for biofuel feedstock demand.

The agency simultaneously said it intends to propose reallocating 100% of the difference between projected and actual 2025 exempted volumes into the 2026 and 2027 Renewable Volume Obligations. The additional reallocation remains subject to supplemental rulemaking — a process that will determine whether the demand impact signaled by the market response is ultimately confirmed, and a key milestone for participants to monitor.

The Renewable Fuels Association said Aug. 31 that while it viewed most of the exemptions as unjustified, EPA's proposed reallocation approach provided a pathway toward preventing a net reduction in renewable-fuel demand.

A Brazil-based soybean oil trader said the reallocation proposal contributed to support for soybean oil futures by reducing some of the uncertainty surrounding the impact of the exemptions on future biofuel obligations. Biodiesel and renewable diesel are important outlets for US soybean oil, making futures sensitive to changes in mandated renewable-fuel volumes.

Higher energy prices also lent support during the period, with firmer petroleum markets improving the relative economics of vegetable oils used as biofuel feedstocks, according to an Argentina-based soybean oil trader.

South American basis absorbs CBOT rally

The sharp CBOT increase was only partially transmitted into Argentine and Brazilian physical soybean oil prices, as export differentials weakened substantially.

Platts, part of S&P Global Energy, assessed Argentine soybean oil FOB Up River for October loading at $1,211.44/mt on Sept. 1, up $15.87/mt, or 1.33%, from $1,195.57/mt on Aug. 26. The Argentine October basis weakened 430 points over the period, from minus 1,320 points to minus 1,750 points against CBOT October soybean oil futures.

Brazilian soybean oil FOB Paranaguá for October loading increased $20.28/mt, or 1.69%, to $1,218.05/mt on Sept. 1 from $1,197.77/mt on Aug. 26. The Brazilian basis weakened 410 points, from minus 1,310 points to minus 1,720 points.

Brazil therefore maintained a relatively narrow $6.61/mt premium to Argentina on Sept. 1, equivalent to about 0.5% of the outright FOB value.

The substantial basis adjustments absorbed much of the increase in the underlying futures market. While CBOT December soybean oil gained more than 7% over the three-session period, Argentine and Brazilian outright FOB values rose less than 2%.

Market participants said the price action reflected continued adjustment in South American physical differentials as US soybean oil futures responded to changing biofuel-policy expectations, while export demand and regional commercial fundamentals continued to influence Argentine and Brazilian FOB values.

Source: Platts