Feedstocks Q3 2026 Update
The third quarter of 2026 marks a change in rhythm following a sharp price rally in Q2. Rather than a continued run-up in prices, the feedstock and biofuel complex spent much of Q3 digesting the inventories built earlier in the year, as market participants who had positioned for stronger 2026 mandates found themselves working through a system that was, for the moment, comfortably supplied. A partial easing of Middle East tensions took some of the geopolitical premium out of gas-oil-linked pricing, while the regulatory drivers that underpinned Q2 - the US RFS ‘Set 2’ volumes and the German and Dutch biofuels policy amendments - continued to shape demand for compliance-grade material, even as their price impact became more selective by grade.
UCO followed a chopper path than the broad-based Q2 gains. Forecasts pointed to a correction in July as stronger seasonal collection and more comfortable regional supply, particularly across Asian export hubs such as Malaysia, Vietnam and Singapore, before a modest recovery through August as biodiesel and SAF producers stepped up procurement again. By late August, European feedstock desks were describing UCO as broadly steady, with only mild softness in competing oils such as rapeseed (RSO) along the curve. That relative calm sat within a market still framed by longer-term tightness: 2026 benchmark levels have generally clustered in the $1,000 - $1,400 per tone range, with industry estimates continuing to describe UCO as structurally undersupplied against the scale of Sustainable Aviation Fuel mandates - SAF - being phased in towards 2030.
The finished biodiesel grades diverged further from one another through Q3. With inventories elevated after last year’s positioning for stronger mandates, blenders leaned on UCOME and Annex IX A FAME stocks to capture their steep discount to HVO, while HVO producers themselves shifter further toward Annex IX B feedstocks to diversify supply - a dynamic that limited near-term upside for HVO even as demand for lower-cost biodiesel pathways stayed firm. With conventional grades, the split seen at the end of Q2 persisted into this quarter: by late August, FAME-0 was losing ground while UCOME and RME held firmer, underlying how compliance value continues to separate waste-based and crop-based grades even when overall market direction is flat to soft.
Animal fats help up better than the biodiesel complex. European Category 3 material was trading around $1,250 - $1,300 per tonne FOR ARA for August-September loading, alongside US domestic tallow near $1,665 per tonne delivered Gulf - levels that kept the segment elevated relative to earlier in the year. That said, several European sources noted a cooling in US buying interes, leading to a correction in US energy and feedstock prices, with importers pulling back their bids, leaving the market to hold rather than extend its earlier gains into the final quarter of the year.
