CBOT soybean oil futures plunge as EPA biofuel proposal weighs on the market

Chicago Board of Trade soybean oil futures extended losses Oct. 14, following a sharp reversal in the previous session as uncertainty surrounding US biofuel policy and seasonal soybean harvest pressure weighed on the market.

CBOT December soybean oil futures climbed to an intraday high of 70.08 cents/lb Oct. 13 before reversing course and settling at 68.02 cents/lb, down 0.61 cent/lb, or 0.89%, from Oct. 12.

The contract opened at 68.16 cents/lb Oct. 14 before declining to 67.11 cents/lb ahead of midday, down 1.34% from the previous settlement and 4.24% below the Oct. 13 intraday high.

The volatility coincided with an Oct. 13 announcement by the US Environmental Protection Agency proposing to reallocate 100% of additional renewable fuel volumes waived through small refinery exemptions under the Renewable Fuel Standard.

The EPA proposed reallocating approximately 770 million Renewable Identification Numbers, or RINs, representing the difference between the 1.76 billion RINs exempted for 2025 and the approximately 990 million RINs previously anticipated.

The agency outlined two approaches: distributing the additional obligations equally between the 2026 and 2027 compliance years or assigning the entire volume to 2027.

Although the proposed reallocation would preserve renewable fuel obligations supporting demand for feedstocks such as soybean oil, the announcement left uncertainty over the timing of implementation.

Market expectations had already incorporated the possibility of full reallocation, limiting the announcement's ability to sustain the initial rally.

Market participants had anticipated full reallocation but were disappointed by the additional public comment period and the absence of a decision on implementation timing, according to a Sao Paulo-based soybean oil trader.

The EPA is accepting public comments through Dec. 4, leaving the final distribution of obligations between compliance years unresolved.

Meanwhile, the advancing US soybean harvest added pressure to the broader oilseed complex.

The US Department of Agriculture reported Oct. 13 that 46% of the US soybean crop had been harvested as of Oct. 11, up from 25% the previous week, although below the five-year average of 50%.

The increased pace of harvesting coincided with commercial hedging pressure, adding to the bearish backdrop for soybean futures.

The latest volatility follows a 3.19% decline in CBOT December soybean oil futures Oct. 7, when the contract settled at 67.68 cents/lb amid a sharp divergence between soybean oil and soybean meal futures.

The renewed weakness highlights the sensitivity of soybean oil futures to developments in US biofuel policy, particularly the timing and implementation of additional renewable fuel obligations.