The relationship between feedstock soybean oil and blendstock heating oil that the US biodiesel industry uses to gauge costs and margins, called the biodiesel blending factor, fell to its lowest level in nearly seven months on Monday.
The "boho" factor, as the relationship is also called, fell 4.36 cents from Friday to minus 30.85 cents/gal, the lowest level since January 31, when it was marked at minus 50.53 cents/gal, itself the lowest level since Platts began calculating the factor in August 2008.
The lower the boho factor, the cheaper the production costs for producers, making biodiesel a more attractive option for diesel blending.
The factor has tumbled nearly 20 cents from a month ago as cheaper feedstock soybean oil prices have outweighed softer ULSD futures.
The NYMEX August ULSD futures contract settled up 0.23 cent to $2.8792/gal Monday. On the other hand, the August soybean oil futures contract settlement on the Chicago Board of Trade shed 56 points to 34.88 cents/lb, the lowest front-month settlement since October 2009.
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.
Soybean oil is by far the largest feedstock for US biodiesel production, making up roughly 45% of feedstock input during the first half of 2014.
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 -- subtracting the cost of a gallon of blendstock heating oil.
