KANSAS CITY — In the time since the Environmental Protection Agency proposed much higher-than-expected Renewable Fuels Standard (RFS) volumes for biomass-based diesel on June 13, the markets and the industry have had a chance to let the dust settle and process the news. What many are finding is that uncertainty continues to prevail.

Following the announcement, which many in the trade initially expected would be released before the end of April, Chicago soybean oil futures jumped 17% in two days, including limit-up price gains of 3¢ per lb on June 13 and gains of 3.18¢ to 4.5¢ per lb under expanded trading limits on June 16. Since then, the market has stepped back, with the August contract dropping nearly 6% from the June 16 high.

“The market is going to buy the rumor and sell the fact because it’s still a proposal,” said Erin Nazetta, director of food and agricultural research at Broadview Capital Holdings, highlighting the fact the final ruling may not be ratified until November.

“We are very far away from having certainty,” Nazetta said. “These are all very much proposals with a long list of items that they’re asking the market to comment on, which means they could adjust them between now and the end of October, so we’re far away from knowing what this is going to look like, and I think we’re going to have a lot of months between now and November where there are different ideas that are floated that will drive uncertainty and volatility in the markets.”

The comment period for the RFS proposal ends July 8.

Also, the ongoing lack of guidance regarding Small Refinery Exemptions (SRE) and clarification about what qualifies under the 45Z Clean Fuel Production Credit continues to add layers of uncertainty. Currently, there is a record backlog of pending SRE petitions, which the agency said it will address at a later date. During the first Trump administration, SRE allowances were significantly increased compared with prior administrations, but ideas were the number of allowances granted during his second term may not be as large. Still, the uncertainty regarding the breadth of approved exemptions helped chip away some of the bullish tones of the EPA’s June 13 announcement.

The 45Z tax credit, which previously was approved by the House of Representatives to not allow US tax dollars to fund the use of imported feedstocks, is being assessed in the Senate. But the EPA, for the first time, made its own recommendation in the June 13 proposal regarding foreign inputs, saying foreign biofuels and feedstocks would only be provided 50% of the value relative to domestic biofuels and feedstocks.

Despite the uncertainty, the market does seem to be sustaining a supportive tone as signs indicate the domestic market for soybean oil has shrugged off ideas that the current administration is unsupportive of green energy (at least the agricultural-based variety) and that the recent soybean crush capacity expansion was not a wasted effort.

“We’re moving in the right direction in terms of getting volumes that are relatively supportive to the existing capacity and industry,” Nazetta said. “The soybean oil that’s produced from this new capacity will likely then have to price into the domestic biofuel market, and if the biofuel markets are taking a record amount of soybean oil, then that’s moving soybean oil away from domestic feed and food markets and also keeping it out of the global trade market.”

The situation has the potential to revive the food versus fuel debate, or at least be supportive of higher prices for both sectors, especially as the US Department of Agriculture forecast the US soybean oil ending stocks-to-use ratio at 5% in the June World Agricultural Supply and Demand Estimates report, the lowest level on record, and that US producers have reduced the number of acres planted to soybeans this year. Still, the fog of uncertainty along with the concern of export demand destruction from recent geopolitical events seem to be overriding these bullish factors.

“Having a lot of uncertainty is not great for business planning or businesses in general,” Nazetta said. “It causes people to operate very hand-to-mouth in a very inconsistent way across the industry as a whole and hampers long-term investment decisions.”