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US soybean oil futures and RIN (Renewable Identification Number credits tradeable under the Renewable Fuel Standard) prices rose sharply this week after officials from the oil and biofuel sectors began discussing an increase to the biofuel blending mandate, ahead of submitting their proposals to the Trump administration. However, this price rally is regarded as purely speculative, since such a move could push fuel prices up by 10 to 15%, the opposite of what Trump promised to deliver before the election.
May soybean oil contracts on the Chicago Board of Trade rose a further 5.6% on Tuesday to $1,046 a tonne (+12.3% for the week), amid talk of higher biodiesel production in 2026, even though traders have not yet factored in the potential impact of the US "trade war" against all countries, expected to begin on 2 April.
May soybean futures, by contrast, rose just 1.9% on Tuesday to $380 a tonne (+3.3% for the week), underlining that the rally in oil prices is speculative in nature.
US soybean processing volumes fell 11% in February from January to 5.143 million tonnes, down 2.3% from February 2024 levels, while soybean oil stocks rose to 873,000 tonnes.
On Tuesday, representatives of the "American Oil and Biofuel Coalition" met with the Environmental Protection Agency (EPA) to discuss the need to raise the biodiesel blending mandate.
The agency plans to introduce new blending quotas for biofuels under the Renewable Fuel Standard (RFS), as a first step toward supporting the biofuel industry that Trump has pledged to back.
Although biofuel producers and major oil companies have historically been rivals in the US fuel market, they are now working together to reach a consensus, at the request of the White House, in order to avoid the disputes that occurred during Trump's first term.
According to Reuters, the coalition, led by the American Petroleum Institute (API), is pushing for a biofuel mandate of between 5.5 and 5.75 billion gallons, compared with the current level of 3.35 billion gallons, which is seen as below available production capacity. The coalition has so far agreed on a corn-based ethanol blending mandate of 15 billion gallons, although some members are calling for it to be raised to 15.25 billion gallons.
However, part of the coalition, represented by small refining companies, opposes a high biofuel content in fuel, arguing it would lead to "job losses and higher fuel prices." Truck stop operators and fuel retailers also question the need to raise biodiesel quotas without reinstating the blender's tax credit that expired in December.
They argue that this incentive helped lower prices for consumers, while its replacement — the production tax credit (45Z) — has failed to achieve the same effect, meaning that scrapping the incentive would not only hurt Americans financially but could also create political problems for the White House.
Source: Al Mal Forum