Insight Focus
While markets watched China-US soybean diplomacy, RVO shocked futures. The Trump Administration’s June 13 expansion sent Dec’25 soybean oil futures limit up. Cash prices have since fallen amid oversupply and EPA scepticism, leaving processing margins weak and limiting gains for US soybean farmers.
For the last two weeks, while most of the world has been mesmerised by the Chinese-US soybean diplomacy, something potentially more important for the economics of the US soybean farmer has unfolded.
The chart of the Chicago Mercantile Inc.’s Dec’ 2025 soybean oil futures contract tells the story and includes:
- A blue arrow highlighting the momentous day of the Trump Administration’s shocking expansion of the Renewable Volume Obligation (RVO), requiring higher blends of biofuels into biomass-based diesel. On that day, June 13, the futures contract traded at the highest possible price permitted by the exchange—limit up—hence my use of the word shocking, as the market rightly concluded that soybean oil demand would soar.
- A green dot just below that day’s price, indicating the cash price for crude soybean oil at White River Nutrition’s Seymour, Indiana, facility—USD 0.02/lb lower than the futures price, i.e., a negative basis.
- A green dot below Friday’s price, indicating the current crude soybean oil cash price at Seymour—USD 0.05/lb lower than the futures price, i.e., a more negative basis than on June 13.
Source: Investing.com
What Does This Mean?
The cash price for crude soybean oil is now below where it was when the US EPA, at the direction of the Trump Administration, announced a shocking expansion of biomass-based diesel blending to support the US farmer’s soybean production.
Source: EPA
The physical market for soybean oil remains oversupplied (thus the lower basis level) and feels eerily similar to the February 2024–August 2024 period, when foreign used cooking oil swamped US vegetable oil markets, leading to a collapse in domestic soybean processing margins.
The market has now fully discounted the EPA’s seriousness in implementing the Trump Administration’s pro-farmer biofuel policy and has entered an “I don’t believe you’re gonna get ’er done” mode—i.e., the domestic soybean oil market has lost faith in the EPA.
None of this is good for US soybean processing economics, which necessarily means it is not good for the US soybean farmer, as our industry will not have the profit margins to share with the farmer through higher prices for soybean production.
I think you can see where I’m going with this: it could be that the Trump Administration’s apparent lack of focus on implementing the pro-farmer RVO could largely offset any of the economic gains achieved through the negotiated “temporary pause” of the unofficial Chinese embargo on US soybeans.
