Rising ULSD futures send US boho factor to lowest level since 2014

10.05.2018

The relationship between feedstock soybean oil and blendstock heating oil that the biodiesel industry uses to gauge costs and margins dropped to its lowest level Wednesday in nearly three years and half years.

The "boho" factor, as the relationship is also called, fell 3.07 cents to 5.87 cents/gal, the lowest level since reaching 5.01 cents/gal on November 26, 2014.

Wednesday's decrease came as the NYMEX June ultra low sulfur diesel futures contract settled at $2.2164/gal, the highest settle for the front-month contract since February 27, 2015. The contract rose sharply after data from the US Energy Information Administration showed ULSD stocks were at three-and-a-half-year lows.

Feedstock soybean oil prices also rose on Wednesday. Soybean oil futures added 38 points on the day to settle at 30.87 cents/lb. That gain, however, was outpaced by the rise in ULSD futures.

A lower boho factor signals lower biodiesel production costs and better blending economics. The boho factor is calculated by multiplying the cost of a pound of soybean oil by 7.37 -- the industry standard for the yield for soy methyl ester biodiesel -- minus the cost of a gallon of blendstock heating oil.

Lower boho factors encourage discretionary blending, or additional blending of biodiesel above what is required by federal biofuels mandates.


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