Challenging times.

When Federal Reserve Chairman Jerome Powell recently addressed his audience, he described the overall situation as unusual and challenging. We are indeed living in turbulent and curious times. And it's hard to know where to begin listing the challenges facing economic and political leaders. It's hard to know who or what to believe, or what to expect next. Like a government shutdown halting all activity of its agencies. And if you're feeling lost, rest assured that when everything settles down, President Trump's Sturm und Drang will wake everyone up again. 

Many follow up on all ongoing trade negotiations but it's difficult to keep up with the latest developments, let alone assess their impact on business and the business environment of customers and suppliers. In the edible oils and fats business, the focus has been on the outcome of the China-US trade deal in order to get some feel on where our markets may be heading as fundamentals and trade flows have been more than disturbed.

In EU, officials view the new US demands for trade concessions as a threat to the recently concluded trade agreement. The US demands that the EU removes environmental regulations and wants US companies to be exempt from certain regulations, such as the development of climate transition plans. There are also difficult-to-accept demands concerning US technology companies. EU is the largest importer of products originating in the US and, with the absence of China, EU became the largest buyer of American soybeans…

The US imposed tariffs on most Indian exports, the highest for any US trading partner, due to New Delhi's continued imports of Russian petroleum. Indian Prime Minister Modi recently spoke with Trump and said that "trade negotiations have made good progress." We'll see.

From October 14, China will impose special tariffs ($56/mt) on US ships docking in its ports, in retaliation for the US plan to levy tariffs on ships built, operated, or owned by China before docking in the US… on October 14th  

Last week, Trump imposed an additional 100% tariff on imports from China starting Nov. 1st due to China's "hostile" export controls on critical minerals, essential for production of high-tech products, military and medical equipment, etc. He also questioned the planned meeting with Chinese leader Xi at the Asia-Pacific Economic Cooperation (APEC) gathering in South Korea (Oct. 30 – Nov. 1). The APEC is an inter-governmental forum for 21 member economies in the Pacific Rim that promotes free trade throughout the Asia-Pacific region. And there were even threats to ban Chinese aircraft from the US.

The American Soybean Association (ASA) said it hopes negotiations may resume in order to restore markets and trade relations. An agreement with China continues to loom in the shadows, but traders and producers are growing tired of waiting, and more and more people  doubt that anything will happen this year unless a trump card pops out of someone's sleeve.

Meanwhile, confidence in the global economy is crumbling amid reports of a continued decline in German industrial orders, a downturn in European manufacturing, falling retail sales, and a significant decrease in consumer spending on food and beverages. 

All that stirred-up-turmoil shook global financial markets and billions went up in smoke before the weekend.

USD

Last week, the US dollar index (a basket of six major global currencies weighted against the USD) reached its highest level in nine weeks. The USD strengthened sharply, driven by demand for safe-haven assets due to an unstable foreign exchange market disrupted by the political crisis in France and political unrest in Japan. The decline of the Argentine peso, due to the government's financial difficulties, also boosted the USDX. A stronger dollar is bearish for commodities priced in dollars, such as petroleum and US agricultural products, as it makes them more expensive to buy (in other currencies than the USD).

Petroleum

Reportedly some 1.2 billion barrels of crude are at sea, being transported from one place to another, the highest level of crude in transit on tankers since 2016. When 'floating storage' is added, the level of crude oil at sea is even bigger, the highest since 2020. This suggests demand is well below supply. The ceasefire in Gaza, resumption of exports by the autonomous region of Kurdistan, after a two years stop as well as escalating US-China trade tensions contributed to the bearishness. And there are signs that India has begun a policy of destocking, which could significantly impact demand and price, especially with long-term forecasts predicting a global surplus of 4 million barrels/day in the first quarter of 2026.

Although China appeared to have completed its petroleum restocking, they are building more storage to increase inventories. There are signs that the US and EU are to ramp up sanctions on Russia's energy industry and customers and President Putin warned that removing Russian crude from the global supply could push prices well above $100/barrel. Furthermore last week, the US also imposed sanctions on abt. 100 individuals, entities, ships, a Chinese refinery and terminal all involved in Iran's oil and petrochemicals trade.

Oil markets

As always, there are exceptions such as groundnut oil and butter which have been too expensive anyway but there are many signs pointing to higher oil and fat prices due to declining stocks and supply. It is for instance expected that less soybean oil will be exported on global markets. With the exception of sunflower oil, this upward trend is mainly due to demand for biofuels production: reduced availability of palm oil, with Indonesia set to implement its B50 program next year; fallout from the implementation of REDIII (Renewable Energy Directive) in EU member states; higher blending mandates in Brazil, combined with significant soybean exports to China; and finally, the US, which has yet to finalize its biofuel policy for the coming years. And while all of this is favorable for demand, each scenario comes with "ifs," "buts," and "shadows of doubt." And of course, if the sky falls, all the birds will die. 

Market dynamics also evolve. Palm oil always traded at a discount to other major oils until that ended. The usual discount is no longer usual. It is not exceptional but no longer usual. In recent weeks, on global markets, crude palm oil has been more expensive than crude soy oil and last week RBD palm olein FOB Malaysia was at par with crude soybean oil FOB Argentina and FOB Gulf (us) while Brazil was $20 above. There is enough global demand for palm and other oils whereby prices tend to converge and no oil has to put on a price fight to find a home. It will be interesting to see how (now the highest) sunflower seed oil prices will fare in 2026. 

Palm oil

Appetite from India, the world's largest consumer, disappointed while lower petroleum prices and the prolonged shutdown of US government agencies, also weighed on sentiment. Still, futures gained about 4% this month. Indonesia had better than expected exports in August which resulted in quite lower stocks. 

In Malaysia, palm oil production typically drops off towards the end of the year, after a peak production period, and so inventories are expected to decline further in the coming months. This stock reduction could further support prices, which have been under some pressure from big soybean oil supplies. Lower soybean oil prices have for instance prompted India, the largest palm oil buyer, to buy more soybean oil for the coming months.

Prices will also continue to benefit from uncertainty about Indonesian supplies, which are affected by the planned B50 biodiesel program, which aims to gradually increase the biodiesel content of diesel fuel from 40% to 50% in 2026. Indonesia is the largest exporter of palm oil, and a higher blending ratio will limit its palm oil export capacity, which could stimulate demand for US soybeans and soybean oil.

But there are some issues: if gasoil prices remain low the POGO (palm oil gas oil) spread (now $500/t) increases on higher palm oil prices. Meaning the government needs to increase export taxes which finance the program. But if less palm oil is available for export (abt. 4 to 5Mmt if fully implemented) that export tax needs to go up even more. So, there are some issues with the financing of the program and with the impact on domestic palm oil prices for other uses than biodiesel. Food inflation is very unpopular. 

Another issue is the needed investments in plantations to keep production up by e.g. replacing aging trees etc. Compared to Malaysia, fruit bunch yields/ha are lower in Indonesia which is in need of investments and better plantation management. And there's been some land seizure (alleged illegal palm plantations) by the government which also raises concern about future production. But, there is room for improvement and potential to increase production.

Soybean oil

The market was mostly under pressure from trade talk that isn't leading to a trade deal nor to easing tensions for China. There's the competition from Brazil and pressure from the ongoing harvests in the US, be it a bit delayed but progressing well and looking good. And in South America, weather conditions are favorable for plantings, with sufficient rainfall and Brazil is advancing well.

The soybean complex reacted negatively to the escalating trade tensions, having hoped for a trade agreement that would include soybean purchases at the end of October, when Trump and Xi were to meet at the APEC summit in South Korea. Without Chinese purchases, the price of soybeans is likely to sink soon below $10. And although other countries have partially filled the gap left by China in terms of exports, and the increased US crush also helped, it will not be enough to offset the entire export deficit. Meaning the US may stay sitting on a heap of beans.

Rapeseed oil

Canadian rapeseed prices fell in response to an accelerated harvest with encouraging yields and low exports. The closure of the Chinese market is further shifting Canadian sales to EU. The Canadian harvest is nearing completion, and based on reports of higher-than-expected yields, it may exceed the 20.03Mmt estimated last month by Statistics Canada and perhaps reach or exceed 21Mmt!

In the EU, demand for rapeseed is increasing due to a lack of sunflower seed availability and more attractive crush margins for rapeseed. However, competition from imported sources, Canada and Ukraine, is currently capping price increases.

Oil keeps trading in an inverse NDJ over JFM and remains quite expensive on nearby, also supported by sun oil prices.

Sunflower seed oil

In September, global sunflower oil prices remained high, mainly due to delays in the new harvest. The deterioration in production prospects following unfavorable drought conditions in some parts of the EU also supported prices. The sunflower seed harvest is progressing in the northern hemisphere, with lower-than-expected yields in the EU, Ukraine, and Russia.

Sunflower oil prices remained very well supported by persistent harvest delays, disappointing yields, and farmers' reluctance to sell. At the same time, pent-up demand continues to support prices. Prices for sunflower seed and oil in Ukraine have risen to their highest level in two years but while Black Sea oil commands a premium over soy this is not encouraging e.g. India to step up purchases. 

With Argentina in the export market and when the Black Sea crushers are running at capacity the premium over rival oils may come down in the first half of 2026 but prices are expected to remain strong. Especially if there is no extra push from soybean oil fighting for market share. A lot stands or falls with what happens in other markets.

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