Times of confusion and hesitation

Most markets remain in a wait-and-see mode, reacting to the slightest change in the US’s erratic trade policy that is eroding business confidence. Globally, prices are now often moving in line with comments from the White House instead of fundamentals.

Despite the 90-day pause on tariffs, except for China, agricultural markets remain in peak uncertainty because they are for a very great part import/export dependent business. And although trade deals with South Korea, India and Japan could be announced in May, leaving many other nations in limbo, the trade drama is most likely to continue for some time.

In the first three months of the year, the US economy shrank by 0.3%, the first contraction since 2022, according to Commerce Department figures. Inflation was also higher, fueling the stagflation narrative and limiting the Federal Reserve’s ability to help the economy with lower policy rates as economic sentiment deteriorates.

Despite price uncertainty, inflation in the Eurozone is at 2.2%, steadily decreasing towards the ECB's target and justifying a cautious easing of monetary policy. The trade turbulence has a disinflationary effect with fallen energy prices and a stronger euro, while barring Chinese goods from the US may mitigate an increase in future goods inflation. But the longer-term inflation outlook is uncertain as it depends on the evolution of the global trade order and economic growth. In the euro zone, trade tensions are dampening consumer confidence leading consumers to delay purchases and negatively impacting consumption growth and business investments.

Additionally, the World Bank Group's Commodity Markets Outlook report from end April, forecasts a 12% decline (y/y) in commodity prices in 2025 and a further 5% decline in 2026, with energy prices expected to drop by 17% initially and another 6% in 2026. Food prices are also projected to decrease by 7% by 2025 and 1% by 2026. These declines may also mitigate inflation risks caused by trade tensions, but factors like biofuel policy and weather are still risks for the agricultural-commodity-price- outlook.

While the specter of a trade war looms, there are still fundamental factors affecting prices, including weather and production outlook. Rainfall has been heavy in the Midwest, especially in the southern regions, improving the production outlook for the next US crops. Southern EU has benefited from abundant rainfall, improving soil moisture and prospects for agricultural yields. Central and Northern EU experienced dry conditions, which could still hurt crop development (rape/sun) if sufficient rainfall does not occur soon to bring soil moisture back to normal levels.

Palm Oil

Increased palm oil production in Indonesia and Malaysia has put further pressure on oil prices, and production is expected to continue rising seasonally until at least October. Overvalued palm oil futures continued their slide, which began early April, at around MYR 4,400/mt to settle last Friday at MYR 3881/mt. Over that period, the “3rd position” lost around $150/mt.

Globally, oil prices remained volatile, with palm oil prices in particular trying to recover, based on the perceived recovery of demand in India and China. However, this was quickly stopped by the rebound of Malaysian production. Production for April is expected to be up more than 15%. And as lower prices sometimes bring in bargain hunting Bangladesh, Pakistan and India have slowly started to shop while China and others have been holding back on expectations that prices could go lower in an uncertain global economic environment. Palm oil is still actively seeking demand.

Last Friday July ’25 Palm Oil Futures settled at MYR 3881/mt, continuing the downward glide which started a week earlier on April 25th after an earlier temporary price rebound.

The growing export volume coming on the market with lower prices is just in time to compensate the diminishing volumes of rapeseed, sunflower seed and coconut oils. This should balance the market till the new crops hit the market towards the last quarter of the year. A large pool of oil should then hang over the market with all the crops coming from the field and the seasonal culmination of palm oil production.

Soybean oil

The soybean complex continues to evolve in line with the uncertainties surrounding trade relations between China and the US and the US biofuels policies. Trade tensions and a slowdown in the US crush have put significant pressure on bean prices. But the soybean complex was able to hold thanks to the decline of the US dollar index, much bipartisan lobbying and political efforts to revive the US biofuels market (a subsidy rescue + bigger biofuels mandate for a biofuels sector in severe crisis with subdued demand) and news that China is open to negotiations fueling buying optimism.

Strong payroll data and a positive move in equity markets also spilled over to commodities last week. And if China and the US can make constructive progress the market could break through $11/bushel for beans and $0.50/lbs. for oil, and stay above those levels.

However, on biofuels and on China, there’s only been talk, it’s not a done deal and the devil could be in the detail. A couple of things could dampen optimism quite fast.

Last Friday, Reuters reported that the Trump administration proposed a $15 billion budget spending cut which includes renewable energy, the Environmental Protection Agency budget, cuts to the US Department of Agriculture budget, etc.How this will be negotiated in Congress and turn out in practice and when, is difficult to predict.

Low energy (e.g. gasoil) prices, desired by the administration for political reasons, would also require a much higher subsidy to bridge the price gap between fossil- and biofuels and make it viable for biofuel producers to produce.

Soybean oil prices in the US are $70 lower than soybean oil in EU but $160 higher than South American export prices. The US also needs to import about 7Mmt to satisfy their annual domestic consumption (including for biodiesel) of oils & fats of about 30Mmt. Import tariffs could make that expensive. US soybean oil production is not enough.

So, difficult to see where all this will go. Meanwhile the USDA’s crop progress summary from April 28th showed soybean planting across the US was 18% done and improving weather conditions for planting and early crop development.

Rapeseed oil

Rapeseed prices stumbled and fell in a market still heavily affected by uncertainties associated with trade wars and by competition of imported seeds.

Earlier, the vegetable oil sector benefited briefly from a recovery in petroleum prices and an upward attempt of palm oil. But, lower gasoil prices (on OPEC’s planned production increase), ample South American soybean supplies and an increasing supply of palm oil compensating shortages of rapeseed, sun and coconut oils in global markets, continued to weigh on the edible oils and fats complex.

In EU market activity was limited, as there is little supply from the old crop left and there’s been little interest for the new crop. Although continuous British needs for rapeseed products continue to support the market somewhat on old crop positions. Rapeseed prices were pressured by imports and good weather conditions favoring crop development, although warm temperatures and a lack of significant rainfall in certain regions are cause for concern.

Canadian rapeseed, contrary to European, remained quite stable thanks to the continued strong export rate and strong domestic processing whereby Canadian stocks are showing signs of depletion. This season played out well for Canada despite the fact that demand from the US biodiesel sector is minimal and that China hasn’t been happy with Canadian behavior and installed import duties of 100% since March 20th. Spring plantings have already started for this year’s crop but how the game will be played next season is uncertain.

The “May ‘25 Euronext rapeseed futures” contract has now closed, making traders use the next contract for seed pricing. Seeds traded lower and “May ’25” settled at €491.25/mt at the end of April. Last Friday, “August ‘25 rapeseed futures” closed at €471.75/mt.

Prices of “crude rapeseed oil Fob Mill” dropped by about $50 in two weeks and although rape oil prices eased quite a bit on poor biodiesel margins, muted demand, the transition period MJJ from old to new crop (August) can still get challenging in terms of non-gm-seed and oil availability.

Sunflower seed oil

In Argentina the crop keeps getting bigger and there are now estimates between 4.7 and 5Mmt circulating in the market vs. 3.8Mmt last year.

In the Black Sea region, the processing of seed is down due to lower crush margins because of high seed prices, poor farmer’s selling and relatively low oil prices as oil demand in the export market is low. In some destinations rival oils, such as palm, got more attractive.

But seed prices are also capped on expectations of an all-time record sunflower seed crop nearing 61Mmt this year. This means the market counts on 6Mmt more production globally of which 1.7Mmt more in EU. This is taking in account a bigger area sown in and normal weather. But in Ukraine spring plantings are already running behind. Soil moisture is insufficient and rain is needed in May. Globally, optimal weather will be essential.

Oil prices eased somewhat due to weaker palm, soy and rapeseed oil and are mostly moving sideways. Also, expectations of lower prices coming in the next season tempered global buying appetite but should encourage old crop selling. The price difference for crude sun oil between the Black Sea and N.W. EU is minimal; Argentina export prices are $50-$70 lower.

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