February 12

2/12 - Two forces should be driving soy-oil prices higher. The first is El Niño, which historically brings drought to Malaysia and Indonesia, cutting palm oil production. Secondly, new refining techniques allow renewable diesel to be made from 100% veg-oil - and be indistinguishable from petroleum-based diesel. Renewable diesel plants under construction will double production from 2022 to 2025. So, why are soy-oil prices falling? The biggest reason is that fuel producers’ tax credits are based on emissions, so lower carbon intensity oils - canola, animal fat, used cooking oil - have been in higher demand than soy-oil for making renewable diesel. Soy-oil futures, which hit $.72/lb in July 2023, have declined to $.4726 (2/9). The average of CME forward futures contracts for the balance of 2024, 2025, and 2026 are $.4734, $.4651, and $.4544/lb, respectively. Numbers this low were unimaginable a year ago.