August Pricing Analysis - North America Biofuels

SUMMARY

The North America biofuels complex split in August, with renewable diesel and biodiesel rallying hard while the RIN stack round-tripped on policy noise. Renewable diesel led the complex, gaining through W2 and W3 before flattening, with the four B99 hubs following a near-identical path. D4 and D6 finished close to where they opened but sold off sharply in W4 as reports of a 1.2-to-1.8-billion-gallon exemption package priced in lost blending demand, then recovered within two sessions once reallocation was signaled. The blended feedstock index rose 6.5%, driven almost entirely by corn, which outpaced Chicago ethanol by roughly 12 index points, while the biodiesel complex ran the other way and outperformed both soybean oil and UCO. EPA's ruling, exempting 1.76 billion RIN gallons with a reallocation pledge, landed after the Aug 31 close, so August priced the leaks rather than the rule.

MARKET ACTIVITY

Blended Feedstock Index (W1=100)

PRICE ACTION

• Soybean oil rose 4.1% on news of China buying 13 US cargoes in early August and an August 12 WASDE yield of 52.7 bpa, with a W4 dip to 67.26 c/lb tracking the same SRE selloff that hit RINs.
• Kinder Morgan Argo ethanol rose 4.75% to $2.052/gal as corn feedstock climbed 18.0%, with Midwest production at 1,062k b/d (w/e Aug 21) ruling out supply tightness as the driver.
• The D4-D6 spread widened through the month before narrowing at the end, with D6 falling harder than D4 during the exemption selloff; the EPA's final rule concentrated volume growth in biomass-based diesel and advanced categories while holding conventional ethanol flat.

CROSS-MARKET DYNAMICS

• Corn outpaced ethanol by roughly 12 index points across the month, the only feedstock-product pair in the complex where the input outperformed the output, leaving Midwest producers absorbing cost faster than they passed it on.
• The biodiesel complex outperformed both of its feedstocks, reaching 117.55 against soybean oil at 104.08 and UCO at 97.32, a gap of 13 to 20 index points that points to higher margins through the month rather than cost pass-through.

SOMETHING TO WATCH

• EPA RIN exemption and reallocation timeline:
  • Observation: EPA exempted 1.76 billion RIN gallons for 2025 and promised to propose returning all of it to the 2026 and 2027 obligations by end of October.
  • Why it matters: The ruling landed after the Aug 31 close, so the market is trading the promise rather than the rule.
  • What to monitor: The October proposal, its category split, and the Oct 1 compliance date.
• D4-D6 spread as the reallocation-split signal:
  • Observation: The D4-D6 spread widened through the month before narrowing at the end, with D6 falling harder than D4 in the selloff.
  • Why it matters: Which grade recovers depends on where October's reallocation volume lands, so the spread shows what split the market expects.
  • What to monitor: The weekly D4-D6 close through the October proposal.

Note: All figures, prices and market activity referenced in this report are based on the period covered by this monthly update.