AG-PF-0003 Stabilized/poultry fat, fob Alabama/Georgia, cts/lb
AG-PF-0006 Stabilized/poultry fat, fob US Mid-South, cts/lb
AG-PF-0006 Stabilized/poultry fat, delivered US Delmarva Peninsula, cts/lb
AG-PF-0002 Poultry fat, less than 4% ffa, fob US Southeast, cts/lb
AG-PF-0004 Stabilized/poultry fat, delivered Carolinas, cts/lb
AG-PF-0001 Chicken fat, less than 4% ffa, fob US Mid-South, cts/lb

These prices are a part of the Fastmarkets Animal Fats and Oils price package.

For more information or to provide feedback on the delayed publication of this price or if you would like to provide price information by becoming a data submitter, please contact Ryan Standard by email at: Ryan.standard@fastmarkets.com or at pricing@fastmarkets.com. Please add the subject heading “FAO: Ryan Standard, re: Poultry Fat.”

Please indicate if comments are confidential. Fastmarkets will consider all comments received and will make comments not marked as confidential available upon request.

To see all Fastmarkets pricing methodology and specification documents, go to https://www.fastmarkets.com/methodology.

The post Delayed publication of poultry fat prices appeared first on Fastmarkets.

This report focuses on:

• US feedstock capacity, supply and demand
• Feedstock price trends and drivers
• Biofuel margins in relation to credit programs

There is near-term risk for lower prices in the renewable fuel feedstock markets due to production interruptions at renewable diesel production facilities and near-term weakness in the soybean oil, energy and renewable fuel credit markets. Fastmarkets Agriculture holds a long-term view that market fundamentals are supportive of historically higher prices with continued volatility based on growth of renewable diesel and sustainable aviation fuel (SAF) production around the globe.

Animal fats used cooking oil (UCO), and distiller’s corn oil (DCO) prices have all come off of their late summer highs, driven by lower soybean oil (SBO) futures. The SBO market was trading in the mid-70 cents per pound range in late October and November before collapsing to the lower 60s in early December. The move down was prompted by the EPA’s release of Renewable Volume Obligations (RVOs) at lower-than-expected numbers on December 1st.

View the underlying data

US production and capacity

Additionally, some renewable diesel plants have produced below capacity to start the year, which runs contrary to what many traders and producers were expecting. As a result, there are long positions in the current market that will need to be liquidated in short order.

Historically, sellers holding animal fats, or any other biofuel feedstock, could sell product into the feed or oleochemical sector, but the high prices relative to corn and soybean oil have driven many buyers into the palm oil and palm derivate markets.

However, the short-term lack of demand will be mitigated by eventual fixes and the continued expansion of the renewable fuel industry in the United States and around the globe. The planned capacity in the United States is set to grow 50 percent over the next twelve months, from 2.4 billion gallons to 3.6 billion gallons by December.

Production estimates to affect feedstock prices and biofuel margins

The added production across several different facilities is bullish for feedstock prices. However, the increase adds supply to the renewable fuel credit pools. The added supply has already had the effect of lowering prices of California Low Carbon Fuel Standard (LCFS) credits and the influx of Renewable Identification Numbers (RINS), which are credits generated under the federal Renewable Fuel Standard (RFS) on the added production could weigh on RIN prices and therefore biofuel margins, capping the price of feedstocks in 2023.

Weather and war will play a large part in determining prices in the second quarter and second half of 2023. Dry weather in South America and any heightened disruption to the supply chain in the Black Sea region could send commodity prices higher and in turn, pull biofuel feedstock prices along for the ride.

Managing high volatility

To effectively mitigate the financial risks that come with such high volatility, planners, traders and buyers in the biofuel space must monitor the credits and feedstock markets daily and have access to verified, accurate data and analysis, as well as spot prices, reports and news.

Our platform is designed to survey the full spectrum of traders, buyers and brokers to capture the best price points and ensure a robust assessment of market trends. We help you navigate all the uncertainty within the market today so that you can make the right business decisions.

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The post Biofuels and feedstocks: Market outlook 2023 appeared first on Fastmarkets.

The bill includes a new dedicated tax credit for sustainable aviation fuel (SAF) and an extension of the existing credit for road-based biodiesels through 2024. Still, it then transitions to a ‘Clean Fuel Production Credit’ for the years 2025-2027, with the new credit applying to domestic production credit only, unlike the current BTC.

The package of measures in a repurposed climate-focused bill (which took many in Washington by surprise) was drawn up by senior democrats in consultation with Joe Manchin, the West Virginia senator who had effectively blocked President Biden’s much-bigger ‘Build Back Better’ bill.

The package, which accounts for around $370 billion in direct spending but could almost double that in potential benefits to the US economy, according to the White House, is much smaller in scope than the stalled ‘Build Back Better’ bill.

Yet it still contains a slew of climate budget legislation including tax credits for various types of biofuels, alternative fuels such as hydrogen, and electric vehicles (EVs).

“With this legislation, we’re facing up to some of our biggest problems and we’re taking a giant step forward as a nation … This bill is far from perfect, it’s a compromise, but that’s often how progress is made: by compromises,” President Joe Biden said in a statement on the bill, which has been named with a nod to surging inflation in the US that has been largely driven by higher oil prices.

The revised package of measures was broadly welcomed by the biofuels sector but also prompted some disquiet because fiscal incentives will taper off later in the decade.

That extension of the BTC through 2024 prolongs a major fiscal incentive for US companies that compete fiercely with European producers on a global basis for waste-based feedstocks such as used cooking oil (UCO) and animal fats, and comes against the backdrop of a boom in conversions of existing oil refineries to renewable diesel (RD) plants and the construction of new facilities.

A SAF tax credit of $1.25 per gallon, which could rise to $1.75 per gallon depending on the greenhouse gas reduction level of the fuel, is also included in the bill and would also be effective through 2024, but from 2025 biojet will also revert to the CFPC payments.

The CFPC establishes a base credit of $0.20 per gallon (or $0.35 per gallon for SAF) multiplied by an applicable emissions factor if the fuel emissions factor is less than a particular threshold.

Meanwhile, the increased credit rate for the CFPC is five times the base rate if prevailing wage and apprenticeship requirements are met.

Expiry date

“We are very pleased that the bill recognizes that SAF requires an additional incentive to attempt to level the playing field with ground transport fuels and their many policy supports. However, we are disappointed that the SAF credits are limited to five years, expiring in 2027 along with other fuels. This new industry needs a longer-term incentive to deploy at scale,” one US SAF producer said in response to the bill.

US producers of biojet have said for years that tax credits are essential for many projects to attract necessary financing.

Language in the bill specifically calls for the use of biomass in generating renewable fuels and prohibits the use of palm derivatives but this would mean first-generation feedstocks such as soyoil and cornoil will be eligible for biojet – unlike in Europe, which has proposed to exclude food crops in its evolving SAF mandate.

Cleaner grid for EVs?

The bill also has provisions to support clean hydrogen, zero-emission nuclear power, an energy source that would be key to decarbonizing grids to power EVs and tax credits of $4,000 to households to purchase used EVs and a $7,500 tax credit to buy a new battery-operated vehicle.

The proposed act also proposes $30 billion of incentives for products and processes that decarbonize energy grids, such as wind turbines and solar panels, and boost demand for domestic sources of raw materials for EVs.

The bill also includes a $10 billion investment tax credit to build EV production plants, wind turbines and solar panels.

Democrat lawmakers have also proposed $1 billion for clean heavy-duty vehicles (HGVs), such as school and transit buses and garbage trucks, and would create a 30% tax credit for commercial EVs.

Lobbies

Biofuels groups such as the Advanced Biofuels Association and Growth Energy said that the extension of existing tax credits for road biofuels and the introduction of new ones for aviation would protect existing jobs and help create additional employment in the sector.

The Renewable Fuels Association said the bill would open up new markets for corn-based ethanol and that provisions to promote carbon capture, utilization, and storage would help incentivize using this biofuel to meet carbon reduction targets.

The lobbies said they would push strongly for the bill to pass through the House of Representatives, in which Biden’s party has a majority but includes some left-wing democrats who may take the view that the Inflation Reduction Act is far too insufficient to combat climate change.

The post US Senate Democrats agree new climate budget bill; includes SAF credits appeared first on Fastmarkets.

Dry weather in key growing regions of South America slashed supply expectations on a balance sheet that was already tight due to rapid growth in the renewable fuel sector.

In the US market alone, renewable diesel capacity is forecast by Fastmarkets The Jacobsen to grow from 834 million gallons per year in September of 2021 to 2.6 billion gallons per year by the end of 2022.

Additionally, the number of plants operating is projected to increase from 10 to 21. In September of 2021 five plants had an annual capacity of over 50 million gallons per year, by the end of 2022, 13 plants are projected to have an annual capacity of over 50 million gallons.

More buyers looking for additional feedstocks in combination with tight supplies of soybean oil and relatively steady supplies of low carbon intensity feedstocks, i.e., rendered animal fats, used cooking oil and distiller’s corn oil, has also driven prices to new highs.

Many renewable diesel producers prefer the low carbon intensity feedstocks because it maximizes their credit generation in the LCFS program and those feedstocks are trading at a premium to soybean oil, more so than ever in history.

A rough gross processing margin which takes into consideration LCFS credits, RIN values at 1.5 to account for ethanol equivalent value, and heating oil as a measure of revenue and subtracting feedstock costs, in this example, yellow grease delivered to the US Gulf, the margin averaged 56 percent lower in February compared to October of last year.

The gross processing margin uses nearby CME ULSD, Fastmarkets The Jacobsen D4 current year RIN prices, Fastmarkets The Jacobsen Gulf yellow grease delivered (forward) and Fastmarkets The Jacobsen LCFS Credit prices for the calculation.

Margins are still positive, but a trend of tighter margins is developing as buyers pay higher prices in order to secure feedstocks. This trend is likely to continue through the year as more plants start-up and buyers are forced to pay higher prices to remain competitive in the market.

The post Renewable diesel margins shrinking on rapidly changing market dynamics appeared first on Fastmarkets.

RD capacity

US RD capacity (including co-processing plants) is set for more growth in 2022, with an expected huge increase from 790 million gallons per year in 2021 to approximately 1.9 billion gallons, while planned capacity will continue to climb to 4.3 billion gallons by 2025.

Key projects coming online during 2022 include Diamond Green’s 400 million gallon per year expansion, the first phase of the Philips 66 Rodeo refinery conversion, Marathon Petroleum’s phase one conversion of the Martinez refinery, and HollyFrontier and CVR Energy projects.

The surge in capacity has sent shock waves through the feedstock market with demand threatening to outpace supply.

Darling International is a 50% owner in the Diamond Green venture and is the largest rendering company in the US, which gives the company solid footing when it comes to feedstock security.

Marathon and Philips 66 previously entered into partnership agreements with soybean processing plants to ensure a certain amount of feedstock availability.

These types of relationships, Fastmarkets EnergyCensus understands, will continue to grow as renewable fuel producers scramble to secure feedstock.

Feedstock highs

Biofuel feedstock prices hit record highs in 2021, driven by strong renewable fuel demand and historically high renewable fuel credit prices.

Refined, bleached and deoderised (RBD) soybean oil hit a high of $2,305 per tonne FOB Central Illinois in June before prices fell on reports of forthcoming cuts to the RFS blending mandates, according to prices from The Jacobsen.

From September through December, RBD SBO prices traded at an average of $1,690 per tonne.

Used cooking oil and tallow prices followed a similar pattern trading sharply lower in early September on demand disruptions into the US Gulf caused by Hurricane Ida.

The current feedstock market is trading under negative pressure due to truck and rail shortages, while delayed starts and production issues at several renewable fuel facilities have led to less-than-expected demand, which has created a surplus of nearby feedstocks.

Surging RD capacity suggests that the current bearishness in the feedstock market will be short-lived to start the new year.

Omicron threat

Covid-19 continued to rattle US renewable fuels markets however, provoking additional delays and changes in renewable volume obligations (RVOs) for 2020 through 2022.

The pandemic primarily affected gasoline/ethanol blending, which recovered at a much slower pace than diesel/biomass-based diesel blending.

Should the Omicron – or another variant – cause downward pressure in renewable blending, EnergyCensus sister publication The Jacobsen believes it will again be limited to the gasoline sector.

The EPA is now better positioned to handle this following their issuance of the proposed blending requirements for 2020 through 2022, however.

Within the recently released obligations, the EPA stated its proposed use of the “reset authority” did not preclude its legal authority to waive volumes under the other waiver authorities.

“Nothing in the CAA [Clean Air Act] suggests that once the volumes are reset, they cannot be modified further, or that the reset authority cannot be used in conjunction with other waiver authorities such as the cellulosic waiver authority,” the EPA said.

The Jacobsen believes the EPA’s foregoing statement leaves them positioned to actively change volumes should another pandemic, or similar threat, affect renewable fuel blending during 2022.

‘Defend the Blend’

A matter of days after the EPA’s mandate reveal, a group of US senators introduced a bill of legislation to protect the biofuel sector against retrospective RVO cuts.

Through the new ‘Defend the Blend’ bill, the EPA would be prohibited from reducing the minimum applicable volume of biofuels into fuels once the RVO levels are finalized for any given year.

While it is early days for the proposed legislation, Growth Energy CEO Emily Skor told Fastmarkets EnergyCensus that it would offer more certainty in the marketplace, and that retroactively reducing RVO levels is “completely unwarranted and unnecessary, adds uncertainty to the marketplace, and exceeds EPA’s legal authority.”

Meanwhile, the ethanol sector, which fared the worst in the recent RVO obligations, is set to challenge the governmental department in 2022, the CEO of American Coalition for Ethanol (ACE) Brian Jennings confirmed.

“We will provide our feedback on EPA’s novel interpretations of its waiver authority in the new year and will encourage EPA to reconsider its proposal to better support low carbon biofuels and take actions to help grow demand for biofuels that benefit rural America as well as the Administration’s decarbonization goal,” Jennings said.

‘Build Back Better’

2021 saw the long-awaited October draft publication of Democratic President Joe Biden’s human infrastructure bill – dubbed the ‘Build Back Better Act’, which promised a string of benefits for the US biodiesel industry.

However, the plan has struggled to get the necessary support it needs to pass Congress – even from within the Democratic party – and while Biden had hoped to get the bill through before Christmas, the Senate will now vote either for or against in January.

Renewable Fuels Association CEO Geoff Cooper told Fastmarkets EnergyCensus that while the path forward for BBB remains highly uncertain, “we strongly support the biofuel-related provisions of the package and hope they ultimately become law.”

Several of the provisions in the draft bill have been welcomed by renewable fuels lobbies, including $1 billion in higher-blend infrastructure funding, a clean fuel producer tax credit, sustainable aviation fuel tax credits, and enhancements to tax incentives for carbon capture and sequestration.

This article was originally published to Fastmarkets EnergyCensus on Wednesday December 29, 2021.

The post US biodiesel industry looks to 2022 with legislative, feedstock headaches ahead: 2022 preview appeared first on Fastmarkets.