The relationship between feedstock soybean oil and blendstock heating oil rose Tuesday to hit its highest level in more than two and a half years, as rising feedstock prices continued to bite.
The "boho" factor, as the relationship is also called, gained 1.8 cents to 82.58 cents/gal, the highest level since it was 83.51 cents/gal on April 19, 2013.
A higher boho factor signals more expensive biodiesel production costs and poorer blending economics, hampering margins. 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 - minus the cost of a gallon of blendstock heating oil.
The boho factor has been increasing steadily since early November, rising for 10 of the last 13 sessions.
Much of the increase has been driven by climbing feedstock soybean oil prices. On Tuesday, front-month soybean oil futures rose 68 points to 29.78 cents/lb, their highest level since August 10. A source said that Monday's announcement from the US Environmental Protection Agency finalizing the federal blending mandates under the Renewable Fuel Standard sparked the rally in bean oil.
The NYMEX January ULSD futures contract settled Tuesday at $1.3690/gal, up 3.21 cents, spurred by strong RBOB futures that lifted the entire oil complex.
