Domestic and US policy changes will be looming large on the radar of overseas biodiesel and renewable diesel producers as 2015 sales enter their final leg. With US lawmakers still pondering a shift from a $1/gal blenders’ credit to a $1/gal producers’ credit from the start of next year, overseas sellers are likely to want to shift as much product as possible to the US before the playing field potentially tilts against them from 1 January.
The world’s largest renewable diesel producer Neste kept a steady gal pace of Q3 sales of palm and waste-based renewable diesel into the US relative to first half sales of 96mn gal, with just over a third of its portfolio (58mn gal) heading to the US. Palm oil prices have since outpaced soybean oil prices as Asian markets have reacted to fears of El Nino and smog-related damage to Indonesian output, despite southeast Asian producers’ ongoing battles to keep domestic palm oil stockpiles in check. REG’s 75mn gal/yr Geismar renewable diesel plant meanwhile is likely to remain shut down until early next year in the aftermath of successive April and September fires, leaving Diamond Green carrying the torch for US production with plans to output 166mn gal by the end of this year relative to nameplate capacity of 150mn gal. EPA reported approximately 388 mn gal renewable diesel (EV 1.7) used in RINs generation in the first nine month of this year.
International soybean markets meanwhile will have to wait until November 22’s Argentinian presidential runoff before they can react with certainty to the country’s change in government after Sunday’s election failed to deliver a knockout blow. But the new government is expected to drastically reduce wheat, corn and soybean export taxes whatever its political hue as the new entrants try to kickstart economic growth. With reports of Argentinian farmers continuing to hoard their beans to evade export duties and a still poor dollar/peso exchange rate, a sudden shift in government policy could quickly steer a flood of beans and soybean oil onto the international markets with a likely depressive effect on prices.
Despite government straightjackets Argentinian soybean sellers have still managed to enjoy a year of strong export growth to mop up the 7% YoY increase in their output. Declared overseas sales of soybeans of 395mn bu by mid-October had already outpaced USDA’s 353mn bu expectation for the whole year, with exports up 50% YoY in each of the past three weeks. Exchange rate and tax policy could also herald quick shifts in Argentinian biodiesel export economics to the US where expectations of a year-end return on the blenders’ credit have kept material moving northwards despite otherwise poor arbitrage economics for much of late Q3 and early Q4.