After the break.
Life goes on, and so do we. But before we do, as this is our first story of the year, we would like to wish you all a happy, prosperous, and healthy 2026.
With many participants on extended holidays, in the last two weeks markets have been fairly quiet and quite depressed. Fundamentally little changed and discussion topics or market focus remain the same: big soybean crops, ample rapeseed supplies, biodiesel policies, geopolitical trouble and war rhetorics, rising government debt and higher (long term) interest rates, deflation and inflation fears, looming recessionary tendencies, etc., and how that might impact supply and demand of edible vegetable and animal oils and fats in 2026.
In 2025, the "US Dollar Index", which measures the dollar's value against a basket of six major currencies (EUR 57.6%, JPY 13.6%, GBP 11.9%, CAD 9.1%, SEK 4.2%, CHF 3.6%) fell by about 10%. This makes goods denominated in dollars cheaper for users of other currencies and promotes US exports. It also helps mitigate the effects of the US-China trade war on soybean exports. Noone can predict it but the USD is expected to remain weak.
While the overall trend in the global economy appears to point to a contraction, certain sectors or regions may perform better than others, although no one can say this for sure. At the start of every year, there are always a large number of unknown unknowns. Surprises lurk around every corner. Looking ahead it often seems an insurmountable mountain. But every year ends end December and when looking back, then, those still alive think "the journey was a piece of cake". Let's prepare for the worst but hope for the best!
Markets
Palm oil
Over 2025, palm oil prices fell by almost 9% and they struggle to recover. They remain very competitive, on global markets, against other vegetable oils, despite the end of seasonal peak production, pointing to a weak global demand. Prices were also negatively impacted by weak petroleum prices and the price meltdown in Chicago.
Malaysia continued to diversify its export efforts towards Africa and the Middle East amid less trade to the EU. Meanwhile, Indonesia, the world's largest producer, lowered its January benchmark export price for crude palm oil to $915.64/mt, indicating burdensome stocks. And there is little or no progress in Indonesia's biodiesel program to go from the B40 to the B50 mandate; with gasoil prices around $600/mt the economics remain challenging.
All eyes are now on the official release of production, export and monthly end stock numbers in Malaysia which will be released soon. The market will also watch the evolution of soybean oil prices and the developments of the biofuel policy implementation in Indonesia.
As we are now in the "decreasing production months" and as there is hope for demand recovery from India which has low inventories, sellers remain cautious. "die Hoffnung stirbt zuletzt" or "la speranza è l'ultima a morire" symbolizes their refusal to give up on aspirations, no matter how dire circumstances may appear. And in the end, they may even be right too.
Soybean oil
Soybean futures closed sharply lower in Chicago on the last trading day of 2025, following disappointing US export sales that fell well short of market expectations. The pace of exports is at its lowest level in 14 years and will be difficult to make up, even if China honors all of its purchase commitments.
The market saw fund long liquidation; technical selling related to end-of-quarter and end-of-year positioning. Another major bearish factor was favorable weather in South America, except for localized drought in southern Argentina, but with forecasts of rain. The drag on US soybean prices also comes from lower prices in Brazil where some harvesting already began in the north.
Trade with China remains below expectations following the agreement to purchase 12Mmt concluded at the end of October and which is clearly not enough to revive US export programs, which remain very sluggish. China is reported to have purchased 8Mmt, mainly for shipment between December and March, but slow deliveries could lead to subsequent cancellations. The market wants to see more physical movement of beans.
The Trump administration's persistent delays regarding biofuel incorporation requirements for 2026 and 2027 have not favored a recovery in soybean oil prices. However, high sunflower seed oil prices could lend some support on global markets. Further, soybean meal disposal could become problematic and limit crush activity and thus oil production. In EU the spread of "avian flu" (H5 bird flu) is presently limiting demand for chicken feed and thus demand for soybean meal, leading to lower meal prices and consequently maybe lower bean prices.
Overall, the global soybean market remains well supplied, and the supply push from South America in the first and second quarters is expected to cap price increases. Many are likely to wait for the January WASDE report before really building up their positions for the new year, and focus mainly on the weather in South America and export news from the US.
Rapeseed oil
Canadian shipments to the EU continued and while prices in Canada continue to fall, European prices followed downhill. Following a particularly abundant harvest, the rapid decline in Australian rapeseed prices further pushed the entire market into negative territory for more than a month. An acceleration in rapeseed import from Ukraine is also expected in the coming weeks. Although Russian attacks on port infrastructure have significantly reduced maritime export capacity, seeds can also be transported to EU over inland waterways, rail, or road.
In the past holiday weeks, oil demand remained subdued and January prices have been under pressure. Also, biodiesel producers remain cautious not to engage too much too far and await the voting/signing and implementation of all legislative proposals. If signed and rapidly implemented it could trigger more demand for rapeseed oil for biodiesel production in EU. But more alternatives such as animal fats, UCO and even imported Soy Methyl Esthers from Argentina may still pop up as we progress into 2026.
Sunflower seed oil
Sunflower seed oil remains the most expensive of the major edible oils. Demand is expected to decline and move closer to its "core demand" in the coming months. For example, Indian sunflower oil imports remain extremely low, as high prices deter buyers; the significant price differential between sunflower oil and soybean and palm oil persists (US$200 to US$300).
Concerns about the security of the Black Sea supply route remain as Russia and Ukraine continue their mutual attacks in the Black Sea. Over the weekend before Christmas, Ukraine's producer and trader "Allseeds Black Sea Group's sunflower and rapeseed oil storage infrastructure" in the port of Pivdennyi, 50 km east of Odessa, was bombed. Thirteen storage tanks were destroyed resulting in the loss of thousands of tons of sunflower oil. In the following weeks, several ships in the region were also hit.
Security risks continue to keep vessel movements uncertain and vessel activity minimal, which, along with the holidays, increased sellers' appetite. Seed prices also fell slightly. Oil and seed prices in the Black Sea remain under pressure due to logistical constraints, which contributes to tightness elsewhere.
Nearby availability and logistic hurdles may support prices but, the recent strikes in the Black Sea, while very serious, have not yet completely disrupted logistics. Within the EU, sun oil was also pressured by the weakness in other oils in recent weeks, as well as by lower activity due to the holidays. Meanwhile, Argentina continued to sell sunflower oil and it has a record sun seed crop of 5.7Mmt in the making (= 10% of global seed production) which is about to hit the market. Longer term, potentially abundant spring plantings (weather permitting) could also put pressure on deferred seed and oil prices.
The situation remains challenging, but the market will sort it out; it always does.
Energy & Economy
Petroleum
Petroleum prices fell by nearly 20% in 2025. Brent futures closed the last trading day of the year at $60.85/barrel, marking the third consecutive year of losses. In recent weeks, the market digested the declining optimism about a peace agreement between Russia and Ukraine, escalating geopolitical tensions in the Middle East around Yemen, the US blockade of Venezuelan oil exports, and President Trump's statement about a new attack on Iran if the country resumed the development of ballistic missiles/nuclear weapons. But all this turmoil didn't wake prices from their hibernation. On the first trading day of 2026, last Friday, "March '26 Brent Futures" closed at $60.80/barrel.
Even with concerns about potential supply disruptions, expectations of an ample global oil supply exceeding demand (by strong production growth from non-OPEC+ members and the reversal of production cuts by OPEC+) remain in place and are likely to limit the upside. But there is always the possibility that a geopolitical risk premium returns an and keeps prices within a certain range. The latest developments in Venezuela may add volatility but it is hard to anticipate how markets will react over the next couple of weeks when the dust settles.
Economy
The global economy largely depends on what central banks do. If the three largest economic blocs stimulate their economies, i.e. pump money in the system, this will lead to a sharp increase in global money supply; an influx of liquidity into (financial, commodity…) markets.
Chinese authorities have already indicated they intend to stimulate their economy in 2026. In the US, a weakening labor market and the midterm elections in November may prompt the Fed and the Trump administration to stimulate. In the eurozone, a strengthening euro may lead to much lower inflation and with the ongoing deindustrialization, US tariffs, Chinese dumping and high long-term interest rates, the ECB might also want to stimulate.
And in what too much money in the system leads to, remains to be seen…. Happy 2026!
∞
∞
Please reach out to your preferred AVENO contact for questions, comments and feedback.