So far in October, 31.46mn gal of biodiesel have been booked to move from Argentina. Of this, 28.32mn gal is destined for the US, despite an arbitrage which remains nominally closed on paper. Fob value indications for Argentinian biodiesel remain in the mid-$2.20s/gal, keeping a slight premium to US prices which have averaged around $2.17/gal fob Houston over the past week. Even so Argentinian material is continuing to flow North in anticipation the $1/gal Federal blenders’ credit will be reinstated which would automatically tip US import economics back into the black.
Prompt Argentinian soybeans are pricing at large premiums to reference Chicago soybeans, leaving nearby arbitrage economics for biodiesel into the US uneconomic but south/north biodiesel spreads into next year looking more appealing. Argentinian bean oil is commanding premiums in excess of 250 basis points over CBOT, dropping to nearer 150 basis point premiums for early 2016. Argentinian SME biodiesel remains offered at steep discount to domestic bean oil reflecting the differential export tax structure which Argentina applies to processed soybean products relative to raw material exports.
The aftermath of Argentina’s presidential election could have a major impact on the biodiesel arbitrage if a new government moves to lift the country’s crippling currency peg or reduce the tax burden on exports.