Your biweekly update on edible oils & fats by Aveno.

One big beautiful gamer changer?

Fair growing weather, the prospect of good harvests in the Northern Hemisphere, and the easing of the Iranian-Israeli conflict accelerated a decline in global commodity prices in the past week. The risk of escalation related to the Middle East conflict and weather concerns which both fostered the previous price rally, have (temporarily?) vanished. Perhaps with summer vacations on people’s mind or heat waves in some parts of the world, last week was relatively calm compared to almost any other week of the year.

Petroleum

Petroleum seems to be back trading Supply and Demand fundamentals instead of a troubled trade environment. Short term there is good summer demand (for distillates) and low inventories. But, rising OPEC+ output and macroeconomic headwinds are expected to weigh on prices as there’s been much talk about shrinking manufacturing output in China, the US and EU. Despite receding crude petroleum prices on lower geopolitical risk, gasoil or diesel prices remain fairly firm, especially on nearby due to strong summer demand and low inventories. July gasoil futures ended last week at $747.25/mt while August ended at $701.

Beautiful gamer changer

In the US, D. Trump's "big beautiful bill," a package of laws that has just been passed by the House of Representatives and the Senate, contains provisions aiming to revitalize many sectors of the American economy. Although opinions differ and have sparked debate, comments, and even criticism, this bill is being hailed in by many agricultural groups, who consider it a big win for agriculture, not only for biofuels, but also for agricultural support in general. With its biofuels policy the “One Big Beautiful Bill” looks to be a major game changer for the US soybean complex.

On the tariff front there was little real news and with the July 9 deadline, marking the end of the 90-day "Liberation Day" tariff pause, fast approaching, the situation could still get out of hand. However, a side effect of bilateral negotiations is that talks with various smaller countries could encourage them to increase their purchases of American agricultural products and reduce the US’s dependency on larger customers. Any trade agreement can be positive for American agriculture if it specifies the quantities and products that the trading partner will purchase over a given period.

Increased demand for biofuel feedstocks in the US will lead to increased oilseed crushing, thus also increase meal production, which will need to go into domestic or foreign animal feed. Trade agreements and stable, predictable markets are needed to get rid of (among other things) beans, meal, or meat… and consumers around the world need to earn enough to pay for it and therefore depend on thriving economies… with viable tariffs.

It will be an exciting Wednesday as D. Trump said he would begin notifying countries from July 4 and ruled out extending the tariff truce. Increased volatility and uncertainty may be coming our way again and prices may go all over the place. Let's brace ourselves!

Growing demand

In Chicago, soybeans, and soybean oil futures in particular, received a further boost last week when Congress passed the "One Big Beautiful Bill." This bill extends the 45Z program for US biofuel producers and limits tax credits to feedstocks of North American origin. This should incentivize producers to use soybean oil rather than e.g. imported used cooking oil from China or animal fat from Brazil. In addition, the EPA's earlier announcement of increased blending requirements, or Renewable Volume Obligations (RVOs) (5.61 billion gallons = abt. 17.95Mmt), for biomass-based diesel in 2026 means that more feedstock will be needed to produce biodiesel. These two policies are game-changers for the soybean market, as more soybeans may be needed to meet the increased demand for soybean oil for biomass-based diesel. Of course, domestic animal fats and corn oil will continue to be part of the US feedstock mix.

On top of the projected production increase of biomass-based diesel in the US, next year, the Brazilian government also announced than the country will increase its blending mandate from 14 to 15% starting August 1st. This will increase Brazilian biodiesel production from 7.9Mmt in 2024 to more than 8.3Mmt in 2025. Brazilian biodiesel is primarily based on soy oil.

So far, farmers around the world have managed to maintain agricultural production to meet growing demand, despite the challenges posed by government policies, geopolitics, war, climate change and weather phenomena such as El Niño or La Niña, the need to replant mature oil palm trees, disease, the use of pesticides, deforestation, regenerative agriculture methods, and more. It’s been a triumph of productivity based on ingenuity, hard work, perseverance, and risk management.

Yet, without thinking and not realizing the efforts and money required throughout the supply chain, most people, and many alienated politicians, in developed economies, take for granted the fact that there is always a pack of flour, a pack of sugar, a bottle of milk, a bottle of frying oil, meat and all other groceries on supermarket shelves… let’s hope it lasts.

Edible oils & fats markets

Palm oil

Soybean oil

In Chicago, the soybean complex suffering from a very abundant South American supply of soybeans and from the tariff wars and from ideal weather conditions in the US for the new crop is trying to recover. But meal is at a two-year low and beans stick around $10.55/bushel not being able to break out above $11.00. Soybean oil however regained quite some health from the biofuel policies which will be fully rolled out at a later stage. Last Thursday “Soybean Oil Aug '25 Futures” closed $0.5455/lbs.!

The problem for soybeans, is the low oil content and its high protein content. Crushers will be crushing for oil demand and not for meal which is about 80% of the bean. Globally the meal supply is increasing faster than demand. While oil supply is more or less lagging behind.

Rapeseed oil

Even though the global rapeseed production is seen bigger than last year there is some concern because the total supply in the 25/26 season may be up to 2Mmt lower than last year on account of carry-in stocks which are estimate to be 3.5Mmt lower than last year. But all stands or falls with oil demand. in EU about 6.45Mmt rapeseed oil is used as biodiesel feedstock, in North America about 2Mmt which in total amounts to about 27% of global rapeseed oil production.

For many reasons, this year, the biodiesel business in the US and in EU has been quite sluggish. In the US, 2026 seems more promising but Canadian biodiesel production may drop. In EU, Germany is preparing new legislation and mid-June a proposal came out (to be submitted to the Bundestag in October) which includes the abolition of double counting for "advanced fuels" to prevent fraud; soy and palm oil-based biofuels are not allowed, nor from their by-products. The limit for blending fuels made from food and feed crops, as percentage of energy content in the fuel, is also reduced: as from 2022: 4.4%, from 2028: 3.5%, from 2030: 3.0%. While GHG savings in the transport sector will rise from the current 10.5% CO2 reduction to 25% in 2030 and 53% by 2040. Which raises the question if more rapeseed oil will be used, or more animal fats? Or will used cooking oil coming from China (barred from the US) still be price attractive enough without the double counting? What with imported biodiesel? The ever-changing biofuel landscape keeps raising more questions than answers…

Canada remains a source of concern. Despite some beneficial rains, crop ratings remained significantly lower than last year's (and previous years). Production prospects for 2025 are less optimistic after an excessively dry spring. StatsCan also announced that it estimates Canadian acreage at 21.5M acres, a loss of nearly 500,000 acres compared to last year. In Canada, the US biofuel policy developments are seen as bullish as the US may struggle to fulfill its mandate from domestically produced oil; Canadian rapeseed oil can then help satisfy the demand for food and or biodiesel. All this is supporting Canadian prices at the moment...

Another potential issue for the coming months is the crush margin if rapeseed meal prices remain pressured by the abundant oversupply of soybean meal on the global market; meaning the relative revenue from the rapeseed oil will have to go up vs. meal. And if Canada, Ukraine and Australia have less to export to EU things may get complicated again. Time will tell.

Sunflower seed oil