Inconclusive vagueness.

Trade conflicts, import duties, China, the war in Ukraine, unrest in the Middle East... all of these issues remained in the spotlight and will continue to determine future price developments. However, they also create a great deal of uncertainty, making it difficult for markets to find a clear direction. Markets seem to be floating in a vague, inconclusive state. Of course, fundamental factors such as the weather continue to play a role, although nothing is as uncertain as the weather.

Money

Fed Chairman Jerome Powell recently expressed concerns about the weakness of the US labor market, which he considers more harmful to the economy than current inflation and the Fed is expected to lower interest rates in September. This may weaken the US dollar and should support US exports. However, the rapid increase in global money supply due to several central banks stimulus measures (lower key interest rates) is also fueling optimism about commodity prices (as a hedge against inflation).

Petroleum

Every day has its story to push up or drag down petroleum prices. The war in Ukraine with the evolution of direct and indirect sanctions on Russia (punishing importers of Russian petroleum) and with drone attacks on Russian energy infrastructure. Last Thursday EU countries started a 30-day process to reimpose UN sanctions on Iran which were suspended under the 2015 nuclear deal (including restrictions on petroleum exports). The end of summer driving season in the US and then, of course, there’s the state of the (global) economy and China’s buying.

India is scheduled to receive Russian crude in September and October while China is also ramping up imports of Russian crude. This lowers demand for US and Middle East crude and petroleum seems in need of real bullish supply or demand news to regain upside momentum.

In the series of predicting prices and the future, analysts at Goldman Sachs see Brent drop to a low $50/barrel next year as they expect an oversupply of abt. 1.8 million barrels per day by the end of the year. The surplus could increase as early as this year, in line with the International Energy Agency which sees a supply growth of 2.1Mbpd this year vs. a demand growth of 700,000 bpd. The future’s not ours to tell but this all will, no doubt, continue to impact global biofuel policies and prices of edible vegetable and animal oils & fats.

Palm oil

Prices of palm oil performed strongly in the past months under strong purchases from countries, like India and China, which were looking to replenish their stocks. This is expected to continue for a while especially if growing production and ending stocks keep a lid on prices.

Market watchers are now speculating if the production in Malaysia/Indonesia will be peaking in October or earlier. Another important factor for supply and price development is Indonesia’s implementation of a higher biodiesel (B50) mandate, in 2026, and its technical and economic viability. To fund the program (bridge the gap between gas- and palm oil prices) a variable export levy on palm is needed and the higher blending mandate leaves less exportable volume.

In this regard, it is noteworthy that EU imports and domestic palm oil consumption have fallen dramatically. With a production of around 3.7Mmt, Latin America produces more than the demand of EU-27; and a growing share of Latin American exports (1.4Mmt in 2024) is shipped to Northwest Europe. Of the global annual palm oil production of more than 80Mmt, European consumption of 2.4Mmt is becoming negligible and less decisive for global price development.

Soybean oil

For the soybean complex, the dominant themes remain China, the “meal problem” and the crush margin. A global supply surplus of beans is in the making; there are too many beans and too much meal, but not quite enough oil. Increased oil demand stems from growing biodiesel demand in the America’s.

There’s a long-lasting confusion in the soybean complex since President Trump threatened to impose 200% tariffs on China (the world’s largest soybean importer), while also expressing optimism for possible trade agreements. For now, China is avoiding US soybeans, and prices move in line with trade news on possible trade deals with the rest of the world and on possible biofuel scenarios in the future. In the US, the market focuses on the absence of China and on the crop as, with favorable weather, a potential US bumper crop weighs heavily. On top come the planting intentions in South America which will add more beans to the heap!

This year, China did not place orders for US soybeans for the fourth quarter (key sales period for the US when their new crop hits the market), despite US beans being the cheapest. China suspended its purchases amid the ongoing trade war and in addition to their purchases from Brazil, Chinese soybean importers bought from Argentina and Uruguay to fill the supply gap from the lack of US shipments.

Because China is now sourcing exclusively from South America, soybean prices there are rising, putting pressure on the crush margin. And if crush margins remain negative too long, crushing stops and so does the production of oil and meal. Just as Brazilian consumption of oil is going up on account of more biodiesel production. On top, South American crushers are more and more worried about the oversupply of soybean meal, especially as more new soybean processing capacity is coming on line to satisfy domestic oil demand.

The latest news was China sending a key negotiator to meet US officials and that can be a surprise in the making for after the Labor Day weekend. If positive, beans (in the US) may rally, but long term there are more than enough beans in the world and it's uncertain on how this will impact soybean oil prices. Developing biofuel policy is key. We live in interesting times.

Rapeseed oil

EU rapeseed and rapeseed oil prices followed the fluctuations of soybean oil and palm oil, the world's two most important oils, and sunflower oil. Prices were supported by a bullish rally in palm oil, driven by stronger demand and expectations of increased consumption by the Indonesian biodiesel industry.

There was also some incidental support (price pessimism alternating with optimism) from the US soybean complex, thanks to record-high domestic crush numbers and the surprising decline in US acreage estimate by the USDA. The “ProFarmer Tour”, which took place last week in the Midwest, also concluded that yield potential was significantly lower than analysts' estimates. But, the lack of Chinese purchases started to raise real concerns there.

Concerns about this year's sunflower production, following the sharp rise in temperatures in the first half of August, also supported prices of rapeseed and rapeseed oil.

But the weight on the bearish side was heavier especially after the Chinese government blocked Canadian rapeseed on top of the already existing 100% import duties for Canadian rapeseed meal and oil. Market watchers also noticed better than expected production numbers in EU, in Ukraine and surprisingly also in Canada where the harvest is starting. For 2025, StatsCan predicted a production of 19.94Mmt while the average trade estimate of 20.9Mmt is even more optimistic, despite earlier weather scares (vs 18.6Mmt a month ago).

Global rapeseed production is seen in excess of 80Mmt vs 75.4 last season. Canadian rapeseed prices have more downward potential unless the weather spoils it for farmers. A lot of (cheap)Canadian and Ukrainian seed is bound for EU which may continue to weigh on prices.

Sunflower seed oil

Hot and dry weather in Southern and Eastern EU harshly affected summer crops such as sunflowers and soybeans. Persistent heat and moisture deficits in Romania, Bulgaria, Greece, southern Ukraine, Hungary and Turkey led to irreversible yield losses. In EU-27 average yield is projected at 1.83mt/ha vs a 5-year average of 2.02mt/ha.

Markets remain very nervous and farmers remain very reluctant sellers of seed. The nearby is getting increasingly tighter and prices are getting support from increased nervous buying interest. Turkey has been on the buying side of seed and oil as their production is much lower than expected on top of very low stocks. Many buyers are “short” and are anxiously awaiting the new crop which may cause a temporary spillover of strength from the old to the new crop.

In Ukraine, the first findings from early sunflower harvests are not exactly reassuring. Harvesting also began in France where the first yield reports from the field were also disappointing. But, although it is clear that the global sunflower seed crop will be much less than anticipated, it is also clear that it will be considerably bigger than last season (abt. 4Mmt). Harvesting is in sept/oct and new crop pressure is still expected to kick in at some point and bring some price relief.

Olive oil

The favorable outlook for olive oil production in 2025/26 could be lower than initially expected due to dry and hot temperatures in Spain and Portugal. Turkey is also predicted to get a disappointing production because of hot and dry weather and might not have an exportable surplus. After record price levels in early 2024, prices were significantly lower mid-2025 due to a 37% EU production increase in the current 2024/25 season. This led to a rebound in exports and consumption after a period of decline. Producers are nervous though it’s still quite early and things might still change. Ending stocks at season’s end are expected below the 5-year average and growers have still the previous 2 disaster years (2022-2023) in mind and are therefore more than cautious, as they’d rather be safe than sorry. Olive oil prices have been firming considerably!

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