An oversupply of uncertainty.  

Persistent geopolitical uncertainty is heightening market uncertainty.

In its Global Risks Report, ahead of the gathering in Davos, the World Economic Forum predicted lots of turbulence for 2026: risk of hybrid and armed warfare between states or power blocs, redefinition of the world order, trade sanctions, geo-economic conflicts, competition for energy resources, artificial intelligence, inflation, etc. The most recent example in a series is the announcement by the "tariff king" D. Trump that he will impose tariffs of 10 to 25% on EU member states that support Denmark with regard to Greenland...

Global agricultural markets also face uncertainty in 2026. Geopolitical tensions and shifting trade flows as well as climate and weather-related issues mean that price variations in commodities are no longer just temporary fluctuations, but a structural challenge for producers and buyers. Supply chains hate uncertainty, and the level of uncertainty seems to be reaching alarming proportions, with unrest in Venezuela, Iran, Greenland, the Black Sea, etc. 

Farmers suffer from too low prices and rising costs for inputs (loans, seeds, fertilizers, …) which could lead to a decline in investment and production. Examples include the need to replace old palm trees in Malaysia and Indonesia, as well as the impact from confiscations of so called "illegal palm plantations" by the Indonesian government.

In Ukraine, constraints on import (seeds, fertilizers, machinery, etc.) and export (income) capabilities risk compromising next year's crops due to a lack of funds and inputs. Argentine farmers planted less soybeans and more sunflowers, as this was more profitable. What will American and Brazilian farmers do if soybean prices go lower and input costs continue to rise?

Price volatility has become a structural feature and 2026 looks set to be just as unpredictable as 2025. Policy measures such as the expansion (US) or reduction (Indonesia) of biodiesel programs, for example, could further intensify this volatility: vegetable oils benefited last week from the surge in soybean oil prices in Chicago, following the Trump administration's commitment to (finally) implement the 2026 biodiesel blending quotas by early March. 

Markets

For last December, the FAO Food Price Index averaged 124.3 points, down 0.8 points from November and 3.0 points (2.3%) from a year earlier. For the year the index averaged 127.2 points which was 4.3% higher than the average of 2024.

The vegetable oil price index (calculated from 10 quotations for soybean, sunflower, rapeseed, peanut, cottonseed, coconut, palm kernel, palm, linseed, and castor oils, weighted by the average share of exports of each oil) averaged 164.6 points in December, down 0.2% from November, reaching its lowest level in six months. For 2025, it averaged 161.6, its highest level in three years and up 17.1% year-on-year, against a backdrop of tight global supply.

Palm oil

The latest monthly data from the MPOB indicated that December production dropped 5.5% from November to 1.83Mmt, tightening supply ahead of the Lunar New Year and Ramadan when consumption is traditionally higher. Exports rose 8.5% in December to 1.32Mmt and Malaysia's end-of-year-stocks peaked at 3Mmt, their highest level in seven years!

As production is now slowing down till end February, stocks are likely to decline; as a lot of acreage in Indonesia (15-20%), gets under government control it is feared that motivation to boost production will diminish; as Indonesia also announced an increase of its export levy from 10% to 12.5% as of March 1st; as palm oil FOB South East Asia is about $130-$170/mt cheaper than soybean oil FOB South America; and as Cargo inspectors perceived exports in the first 10 days of January increased significantly and that buying interest strengthened in India, there should be some upside price potential. And the latest upward move was supported by higher soybean oil prices in the US and higher petroleum prices.

However, 3Mmt is a lot of stock to carry forward and contrary to the situation in the US, Indonesia's decision to abandon its B50 biodiesel project is putting pressure on the market, as larger quantities of palm oil remain available for export from the world's leading producer. The authorities decided not to impose a B50 biodiesel blend this year due to "technical and financial hurdles", but will continue to require the use of B40 (40% blend of palm diesel with fossil diesel). The decision on the mandatory use of B50 diesel depends heavily on the price difference between fossil diesel and crude palm oil. To be continued...

Soybean oil

Although soybean fundamentals remain bearish on ample global supplies which limit the upside price potential, and despite a distressing WASDE report, the soybean complex ended last week on a high note.

The World Agricultural Supply and Demand Estimates (WASDE report) published on Monday, January 12th was quite bearish for soybeans. The USDA slightly raised its estimate for the 2025 soybean harvest, following an increase in harvested area of 124,000 acres to 80.437 million acres, while the yield of 53 bushels/acre remained unchanged. Unchanged yields, a US harvest of 116Mmt, and a carryover of 9.5Mmt exceeded market expectations. Estimated US exports were revised from 44.5Mmt to 42.9Mmt which is still considered overly optimistic given the record crop in Brazil and the lower new crop offerings compared to US FOB export prices.

The USDA revised global soybean production up by 3.1Mmt to 425.7Mmt, and Brazil's production up 3Mmt to 178, thanks to favorable weather and better yield prospects than last year. Global soybean stocks at the end of the 2025/2026 season increased a bit to 124.4Mmt, mainly due to higher end stocks in the US and Brazil.

The WASDE report triggered a selloff, although futures held up relatively well given the prevailing bearishness and ongoing geopolitical uncertainty. Soybean oil prices rose somewhat surprisingly after talk about finalizing the biofuel policy and blending quotas, albeit at reduced levels, and without penalizing imports of biodiesel and feedstocks for these fuels. (although White House trade adviser Peter Navarro has indicated that imported feedstocks would still see a penalty "ending the practice of treating foreign and domestic inputs the same and shifting demand decisively toward U.S. crops and processors."). To be continued.

However, positive signals on the demand side, prompted speculators to cover their 1.9Mmt soybean oil short which led to an explosive rally in Chicago with March soybean oil soaring 292 points on the week. The National Oilseed Processors Association reported a US soybean crush in December at a record 225M bushels which surprised many and boosted the soy complex. Allegedly soy oil stocks rose less than expected during this period but more importantly, soybean oil prices soared on confirmation by the administration that the biodiesel policy for the 2026 blending obligations would be finalized by early March.

In addition, US soybean export SALES also exceeded expectations in the week ending January 8, reaching 2.06Mmt (vs. 877,900 mt the week before), including 1.2Mmt for China that also appeared to be meeting its commitment to contract 12Mmt of beans by February. Egypt bought 273,200 mt, Mexico 191,000, Algeria 89,100, and the Netherlands 68,800. Total export SHIPMENTS for the week amounted to 1.64Mmt, 47% more than the week before. 

In Argentina, plantings are about 95% done, and more than 60% of the crop is in good to excellent condition although the Pampa region is affected by dryness. While the Brazilian crop agency Conab sees a record soybean production of 176.12Mmt, up 2.7% from last year, some analysts have recently estimated Brazil's crop over 182Mmt! This also means record competition for US beans, in an already difficult environment marked by lower Chinese purchases than in previous years.

Significant challenges loom, with the start of the massive harvest in Brazil and uncertainty surrounding China's response, after reaching its 12Mmt target. If demand begins to weaken, prices could quickly retest the lows. And although more biodiesel production in the US is bullish for global demand for all oils, the USDA also wrote in its WASDE report: "Soybean oil used for biofuel is lowered 0.7 billion pounds to 14.8 billion on lower-than-expected use to date and strong use of tallow as a feedstock in recent months". Caution remains justified in light of all the uncertainty ahead.

Rapeseed oil

In Canada, rapeseed prices reached their highest level in a month, on optimism over the Canadian Prime Minister Mark Carney's visit to China and the prospect of a reduction in Chinese tariffs on Canadian rapeseed, oil, and meal.

In EU, firming petroleum prices, and recovering domestic demand fueled the rise in rapeseed prices. European crushers processing more rapeseed and the conversion of sunflower crush to rapeseed crush also contributed to the increase in purchased volumes. Now soaring soybean oil prices in the US and persistently strong Canadian rapeseed prices pushed EU prices higher. 

Last Friday, the Canadian Prime Minister announced that China plans to significantly drop tariffs on Canadian rapeseed, from 80% to around 15%, in exchange for importing 49,000 electric cars into Canada at a 6.1% tariff. This agreement is an improvement in Canada-China relations amid ongoing trade tensions with the US. As details emerge, this news may not have a major impact, as it is already largely priced in, it seems. There is not more or less rapeseed in the world because China and Canada improved their relationship. It could reshuffle trade flows though.

Weak demand from EU biodiesel producers and some imported rapeseed oil has been weighing on the market and with the crush running well rapeseed oil may stay under pressure for a while. Biodiesel market developments and prices of other oils will be co-determining factors for further price evolution.

Sunflower seed oil

Sun oil prices in NW EU exploded to their highest level in about 3 years on strong nearby demand amidst continuous problems for commercial shipping in the Black Sea.

A series of attacks between the warring neighbors in recent weeks has further increased the costs and risks for ships heading to the Black Sea. While Ukraine is attempting to paralyze Russia's petroleum production and export capabilities, Russia is seeking to cripple Ukraine's agricultural export capabilities.

In Ukraine, power cuts are slowing down export logistics. Drone attacks have targeted sunflower oil producing plants, and container handling at ports has also been disrupted. More recent military strikes on port facilities around Odessa and the Danube ports have significantly reduced Ukraine's export capabilities and kept sunflower oil exports at extremely low levels. 

This is starting to cause some short-term shortages here and there. But which could be mitigated by supplies from Argentina where the harvest is about 15% done. Some Argentine seed has been sold to EU already but apparently the oil is also sold to Asia while EU remains overly dependent on Ukraine. 

In the meantime, the uncertain supply situation is keeping prices in EU at their highest level since long, despite that there is not a real physical shortage. The goods are there but hard to get. NW EU prices went $170-$200 over Argentine and Black Sea levels and a further deterioration or tightening of the sun seed/oil supply could become supportive to other oils….

Petroleum

Petroleum prices rebounded in response to geopolitical turmoil, despite the absence of significant supply losses. The capture of Nicolas Maduro in Venezuela by US special forces on January 3rd and the impact of civil unrest in Iran have dominated the market over the past two weeks. Venezuela remains a wildcard, with the possible resumption of Venezuelan crude oil exports likely to influence price trends as trade normalizes on the one hand, and the possibility of a collapse of the regime in Iran and its consequences on the other.

A US military intervention in Iran or not, remained the billion-dollar question. And although no official strike order has been issued, it is possible. Regional states and allies increased their military readiness, reflecting the heightened risk in the region. A senior political official in Tehran warned that international shipping in the Persian Gulf / Strait of Hormuz region would be targeted in the event of an attack.

Geopolitics could maintain high price volatility despite abundant underlying supply and in coming weeks, markets will balance bearish fundamentals with bullishness stemming from concerns about possible supply disruptions due to unrest in the Middle East.

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