Political support. 

In the US, the bulls had a very good two weeks, surfing the China wave thanks to President Trump's posts. The soybean complex underwent an upward turnaround from strong political support, supporting other oilseeds and other oils and fats.

Chinese officials said President Trump and Chinese President Xi might be getting ready to sign a deal when they meet in China in April, extending the trace truce a year and lowering tariffs. And a big push came from optimism around an additional purchase of 8Mmt of soybeans this season announced by President Trump. 

Then there were trade negotiations with India which drove soybean oil futures to their highest level in about two years, on hopes that India will buy more soybean oil after proposing to open its agriculture market to US imports.

And there was a deal with Taiwan and the announcement of a policy most favorable to the biodiesel industry in the US.

The so called "45Z guidance for clean fuel production credit" favors the use of feedstock from the US, Canada and Mexico but also local lower carbon intensity animal fats, corn oil and used cooking oil (UCO). The latter will clean up the market pretty fast and e.g. leave the local oleochemical, feed and petfood industry with no or at least more expensive tallow and could trigger new trade flow changes. The policy is also bullish for soybean and (Canadian and consequently EU) rapeseed oils. One way or the other, more demand leads to globally higher prices although a divorced US domestic market may perform better than for instance the Brazilian market.

Even though the US eased sanctions on Venezuela and as global supply remains ample, petroleum prices kept trading a geopolitical premium of $5 to $7/barrel which has been supportive to edible oils and fats prices. A further petroleum rally could help lift markets even higher as that would be supportive to crops used for biofuels.

Fundamentally it doesn't make much sense for China to buy extra soybeans in the US when looking how big the South America's crop is and with a spread of about US$40/mt between the US and Brazil on a FOB April shipment basis. It's more of a balancing act between commercial logic and diplomatic considerations. If China, despite their struggling economy, does buy more US soybeans, it will be for political reasons. 

Some think Trump needs to buy votes with farmers ahead of the mid-term elections and may return the favor to China by lowering trade tariffs so it would cost China nothing to pay up. Chinese markets will be closed for the Lunar New Year holiday from February 16th to 23rd.

It all illustrates clearly how politics can push prices (temporarily?) higher and change trade flows, even when fundamentals would point in a different direction.

Markets

Petroleum

Palm oil

Last Tuesday's MPOB January report did nothing to stop the fall of palm oil prices which continued to slip from the high close of MYR 4317 on January 29th to close at MYR 4050/mt last Friday. Month-on-month Malaysia's palm oil stocks end of January dropped 7.7%. This first drop in 11 months was driven by higher exports and by production dropping to its lowest in 10 months. However, compared to January 2025 stocks remained sky high. 

Export momentum also eased and cargo surveyor data showed exports in the first 10 days of February fell about 12% compared to the corresponding period in January, which raised concerns over short-term demand. Indonesian palm oil traded at a discount vs. Malaysia, indicating also burdensome Indonesian stocks and sellers pushing sales before the export duty increases in March, after which Malaysia is expected to become more competitive again and to regain global market share. The Indonesian export tax (used to finance the biodiesel program) for crude palm oil will go from 10 to 12.5%, and for refined palm olein from 7.5% to 10%. 

India, the world's largest importer of vegetable oils, is expected to step up its buying of palm oil to replace the more expensive sun and soy oils. This could help reduce stocks in Indonesia and Malaysia, while supporting palm oil prices.

But any price increase may be capped by forecasts of weaker Chinese demand this year, with buyers increasingly turning to locally produced soybean and rapeseed oils. Also, a reported slowdown in inflation in January pointed to sluggish domestic demand. Food prices fell for the first time in three months. China's weakening economic growth could further limit demand for food and feed. 

Future palm oil production in Malaysia and Indonesia is being speculated about, and remains fuzzy and uncertain. Nevertheless, palm oil prices should remain highly sensitive to demand developments and the price evolution of competing oils on the global market.

Soybean oil

The strong market momentum of the past weeks has led to bullish prospects, but the continuity of this price increase remains highly uncertain given the record big crops in South America and acceleration in the pace of Brazil's ongoing harvest at a time when Brazil's peak export season is offering far more competitive prices.

Soybeans have gained nearly 70-cents in the past two weeks and managed money pushed futures to new highs over several weeks, with soybean oil, jumping to near two-year highs, leading the complex as the market welcomed the warming of trade relations between India and the US. Soybeans also soared when Trump posted China to buy more US soybeans and the US biodiesel sector started to recover at the beginning of the month, on commitments of the Trump administration that are very favorable for US biofuels and the use of soybean oil. 

There were some weather concerns with heavy rains in parts of Brazil and dryness in parts of Argentina but overall, the supply from Brazil, Argentina, Paraguay, Urugay…. is still expected to be quite overwhelming. Even with doubts on the size of the Brazilian crop as more quality problems are being reported about farmers harvesting beans at 30 to 35% moisture and elevators refusing moldy and bad quality beans that do not fit the quality standard, production estimates remain record high. In Argentina the arrival of rainfall improved yield potential.

Last Tuesday's February WASDE report from the USDA was not a market mover but it did trigger discussion around the export volumes. If China does buy 8Mmt additional in the US, it could mean that other buyers buy cheaper beans in South America; a mere switch, in the end, would not be that bullish. Some concerns still rose however about the US (not the world) running out of beans this season. Evolution of (end)stocks will be a critical thing to watch. 

Chinese buying is also a bit of a mystery as the country continues to import increasingly large quantities of soybeans. It could be they want to cash the crush margin themselves and crush with the goal of exporting soybean meal and soybean oil in the region (after domestic needs are fulfilled, dumping excess crush capacity in the export market). 

Before the long weekend for Presidents Day on February 16th markets had some profit taking but the bullish momentum in the US is expected to last for a while. 

Rapeseed oil

In EU, rapeseed had benefited from relatively strong domestic demand, which however dropped considerably since the beginning of the month due to higher seed prices and lower crush margins. Despite their recent price increase, Canadian rapeseed remains highly competitive and stocks are big: according to StatsCan, stocks stood at 15.6Mmt at the end of 2025, up 3.4Mmt from end-2024, and at their highest level in six years.                 

Oil demand has been low, which is to be expected from food demand at the beginning of the year till the weather turns warmer in the run-up to Easter. But it is also significant that the demand from biodiesel producers has been so weak. 

EU biodiesel prices eased into February as rapeseed oil methyl esters (RME) prices came under pressure due to imports from South East Asia and North America as well as from accumulated stocks across EU. This despite seasonally higher demand for 'winter diesel'. Further, there is an ample supply of 'lower carbon intensity' used cooking oil (UCO) on the market which is also keeping producers of HVO/biodiesel away from rapeseed oil. As summer nears, demand is likely to shift further away from rape oil when CFPP requirements (Cold filter plugging point) are less stringent as no 'winter diesel' is required.

Nevertheless, the oil market remains in an inverse indicating some sort of tightness….

Sunflower seed oil

As a result of the widening spread between sunflower oil and other edible oil prices, Indian imports of sunflower oil are expected to drop by about 10% this season, to their lowest level in four years. On a CIF India basis, Black Sea crude sunflower oil costs about $255/mt more than palm oil and $165 more than soybean oil. Leading India to only import its core demand estimated at 200 to 225,000 mt/month. This season imports of sun oil could drop by 300,000 mt to around 2.7Mmt. A perfect example of price elasticity.

Supply constraints and logistics in the Black Sea continued to limit significant price drops.  Therefore, buying remains hand-to-mouth and forward purchases minimal. The price of sun oil on nearby remains historically high vs. competing oils, and dampens demand while limiting bullish momentum.

Buyers seem rather cautious than scared, which explains subdued market activity. Tightness is perceived not to last and in this steep inverted market new crop oil is being offered at a discount of $200; competition from other oils is strong. Overall, the market remains more on the defensive than bullish. Who will blink first? Sellers or buyers? is a good question.

Olive Oil

Torrential rains and violent storms in recent weeks have devastated agriculture in southern Spain. Olive trees in full harvest were also affected and big losses have been reported. The province of Jaén, which produces about 20% of the world's olive oil, is experiencing one of the worst harvests. Olives were torn off the trees by the wind and rain, and there is talk of growers losing 50% of their production, and in some regions, losses could reach 80%, or even 100%. At the same time, Portugal has a very low production.

The quality of olives is affected by humidity, and it is expected that relatively little oil of good sensory quality will be produced. However, Tunisian production is record high, which pressures demand for Spanish oil somewhat, and that could have a moderating effect on prices. No price declines are expected at this time and price increases for good quality are in the pipeline.

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