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Americas Biodiesel Ethanol US

LCFS steadies above $80 as bid/offer spreads narrow

PRIMA’s California LCFS Index moved down to $85.50 on Monday, as the best offer stepped down to $86 for Q4 transfer, while buy side interest was shown at $85 for Q4 transfer. Q1 transfer selling interest sat higher at $90. Still, activity was slower than the previous week’s deal flurry which witnessed trades at $87 and $85.

In the wider US biofuels markets on Monday, Houston biodiesel kept to a mid-market level of $2.20, against a stronger heating oil backdrop as the front month rallied to 151.05 cents/gal. The mid-market value for D4 RINs finished at 54.7 cents/gal, compared with the 14.88 cents/gal which current LCFS credit incentives translate to for Midwest SME. Lower CI Midwest corn oil based biodiesel in contrast now benefits from a $1 LCFS incentive to ship to California. The consumption of corn oil as a US biodiesel  producer input was reported at 108 mn bl in August, up 18.7% YoY, according to EIA.

The D5/D6 RIN spread Monday closed at 14.75 cents/gal, as D5 edged into the mid-50s cents/gal, compared with a 27.24 cents/gal LCFS premium for Brazil sugarcane ethanol. However, the arbitrage opportunity for Brazilian ethanol to ship to the west coast remains closed, with the price of Brazilian ethanol at $1.90/gal still too high to work northwards against cheaper US corn ethanol despite sugar cane ethanol’s combined LCFS/D5 RIN price advantage.

 

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