The relationship between feedstock soybean oil and blendstock heating oil that the US biodiesel industry uses to gauge costs and margins fell to its lowest level in nearly six months on Tuesday.
The "boho" factor, as the relationship is also called, fell 3.87 cents from Monday to minus 23.5 cents/gal, the lowest level since February 3, when it was at minus 24.74 cents/gal.
According to Platts data, the factor previously hit a record low on January 30 at minus 50.5 cents/gal, the lowest level since Platts began calculating the factor in August 2008.
The factor has tumbled nearly 25 cents in a month as cheaper feedstock soybean oil prices have outweighed softer ULSD futures.
The NYMEX August ULSD futures contract settled up 1.88 cents to $2.9067/gal Tuesday. On the other hand, the August soybean oil futures contract settlement on the Chicago Board of Trade shed 27 points to 36.25 cents/lb.
The plunging cost of feedstock soybean oil -- which is projected to have a record year in terms of global production -- is a bright spot in biodiesel margins at the moment, sources said.
Despite the December 31, 2013, expiration of the $1/gal blenders tax credit, biomass-based diesel production through the first six months of 2014 outperformed the 2013 pace, primarily due to the cheaper feedstocks.
US production of biomass-based diesel in June surged 4.42 million gallons from May to a 2014-high of 149.079 million gallons, US Environmental Protection Agency data showed Friday.
Biomass-based diesel production totaled 779.9 million gallons through the first half of 2014, compared with 706.43 million gallons across the same period of 2013.
Soybean oil is by far the largest feedstock for US biodiesel production, making up roughly 45% of feedstock input in 2013.
The "boho" factor is calculated by multiplying the cost of a pound of soybean oil by 7.37 -- which is the industry standard for the yield for soy methyl ester biodiesel -- and subtracting the cost of a gallon of blendstock heating oil.
