By Tom Polansek and Karl Plume

CHICAGO (Reuters) -Archer-Daniels-Midland, a major U.S. soybean crusher and biofuel producer, slashed its bids to buy the oilseed this week ahead of an expected Trump administration announcement on biofuel blending requirements, a primary driver of demand for soybean oil.

Processors such as Chicago-based ADM have been waiting for the U.S. Environmental Protection Agency's decision on blending requirements for months as they grapple with slumping crush margins and abundant soybean stocks.

Reuters reported on Thursday that the EPA is expected to propose blending requirements below industry recommendations on Friday, leading to lower-than-expected demand for soyoil to be used in biofuels.

ADM said in an emailed statement to Reuters on Thursday that it does not have insight around the pending blending announcement beyond publicly available information and that it independently sets its basis bids, which is the difference between futures and a local cash price to take possession of the grain immediately.

The company on Wednesday rolled its cash basis bid at its flagship Decatur, Illinois, facility to 20 cents below the Chicago Board of Trade November soybean futures price from 22 cents over July futures.

The roll to November futures, which closed at a 15-cent discount to July on Thursday, lowered the local cash price by about 60 cents a bushel, representing an unusually sharp 6.5% drop in the price offered to farmers.

ADM also rolled basis bids at its other crushing facilities, and some rival processors, including Cargill, followed ADM on Thursday. Other processors kept their basis bids against the July futures contract, but lowered basis values by up to 15 cents.

"ADM Decatur put the bean market in a frenzy," agriculture trading company John Stewart and Associates said in a note.

Falling basis values reflect expectations for a large autumn harvest and weak demand that has eroded processing margins for companies that crush beans into soymeal livestock feed and soyoil used for cooking and producing biofuels.

Crush margins have struggled as a recent jump in U.S. processing capacity has swelled available supplies of meal and oil and pressured prices for the soy products.

Tariff worries and unclear U.S. biofuels policies have stoked further unease among crushers and biofuel makers, and some biodiesel producers have scaled back or idled plants.

ADM said in April it would permanently close a South Carolina soybean processing plant to cut costs.

"Cash crush margins stink, and there is a bunch of downtime scheduled for July," said Charlie Sernatinger, executive vice president for Marex Capital Markets.