What to make of it all?

Since the start of the war in the Middle East on February 28th, fluctuations in petroleum prices have had a major impact on the prices of many commodities. It is important to see and understand that spot prices are higher than forward prices, and that physical crude petroleum (+ derivatives) for immediate delivery has been trading at about $50/barrel over Brent futures, which were trading at around $97/barrel on Friday. Meaning that physical crude, in some markets, is worth about $150 per barrel!

Regardless of price, some products are not available in certain markets. The physical market is tight. The lack of natural gas in India is reducing restaurant cooking and, in combination with higher prices, this is beginning to reduce edible oil consumption. Not to speak of shortages of jet fuel and diesel. It may take a while to bring all these supply chains back to normal. Here and there biofuels can help alleviate some of the problems but only to some extent.

The demand pull from the bio-based-diesel producers around the globe will have a major impact on edible oils and fats markets this and next years. More demand usually means higher prices but is still very much unclear how much global (food and other) demand these higher prices will kill in the most price sensitive markets. And unclear how higher fuel and fertilizer costs will impact production and prices of agricultural products this and in years to come.

Geopolitical tensions remain high but a spark of light last Tuesday night led to a two-week ceasefire agreement which hopefully leads to peace.

However, the ceasefire has so far failed to result in a return to normal shipping traffic in the Strait of Hormuz which remains firmly under Iranian military control. Iran continues to determine who may and may not pass. Ship operators continue to await details and clarification on security guarantees before sailing. And their priority is the departure of about 800 ships stranded in the Gulf, rather than a massive influx of new ones.

The market will anxiously watch if the ceasefire holds and if a peace agreement can be reached. Formal negotiations between the US, Iran, and Pakistan began in Islamabad on Saturday the 11th. 

Let's prepare for the worst while remaining hopeful that everything will turn out for the best.

Markets

Since end February, petroleum has been the main driver of volatility in the oilseed market. Brent Futures soared from $70 to peak at around $112 before falling below $91/barrel following the announcement of a ceasefire and confirmation of a projected increase in OPEC+ supply, dragging down the entire oilseed complex. Later, Brent Futures rebounded to trade around $97 last Friday on uncertainty surrounding a shaky two-week ceasefire. Along the way, currency fluctuations have only heightened that volatility.

Palm oil

As the seasonal peak production months approach, the full extent of the damage and adverse effects of the war, which extend beyond rising prices, to supply chains, and its impact on consumer purchasing power (around the world) remains to be fully assessed in the coming weeks and months. Economic fallout is difficult to time and predict.

Concerns about demand have grown as imports into India fell by 19% in March, reaching their lowest level in three months, as high prices curbed purchases. But, the most optimistic observers see this as a possibility of restocking after the dust settles.

Prices could also stay well supported due to higher biodiesel production in Malaysia and most importantly in Indonesia. As part of the efforts towards energy independence, in early April, the Minister of Agriculture declared that the government is implementing the B50 policy, the blend of 50% palm oil-based biodiesel and 50% fossil diesel fuel, on July 1st. The policy should enhance energy security and help farmers while stimulating economic activity. This will generate more domestic consumption, leaving less palm oil available for export…

Soybean oil

The soybean complex remains vulnerable to fund long liquidations.

Soybean futures continued to consolidate within a well-defined sideways range. The weak dollar and strong domestic crush demand provided support, while positive export data reinforced this trend. Optimism regarding the Beijing summit in mid-May and hopes of additional purchases by China ahead of the meeting explain why soybean prices haven't fallen deeper. The market remains constrained by ample South American supplies with the Brazilian harvest 82% complete, in line with last year, and the next Argentine crop in the pipeline.

Strength in soy meal supported bean prices, but soybean oil, on the other hand, followed a downward trend. Initially buoyed by petroleum prices, oil then, after reaching a three-year high, plummeted following a massive sell-off in the energy markets after the announced cease-fire in Iran. If this is the beginning of a significant downward correction it could weaken soybean prices.

On Thursday April 9th, the USDA released its World Agricultural Supply and Demand Estimates (WASDE) report, with no changes to US old crop soybean carryout numbers indicating the US is facing comfortable supplies. Domestic soybean oil production was higher than in the previous month due to a larger domestic crush projection. Biodiesel use was left unchanged but projected use for food, animal feed, industrial use, and exports were higher. Soybean meal stocks remained unchanged as the increased production is expected to be absorbed by domestic use.

No changes were made to Brazil and Argentine productions while the 2025/2026 global soybean ending stocks were estimated near market expectations and hardly changed from March at 124.8Mmt.

Rapeseed oil

In the EU, seed demand from oil-crushers remains cautious given the many uncertainties about production costs in the short and medium term caused by the war in Iran. 

However, international tensions remained high following aggressive talk against Iran, which ultimately led to a two-week ceasefire agreement last Tuesday night. Iran did talk about a gradual reopening of the Strait of Hormuz, but subject to certain conditions. The ensuing drop in petroleum prices affected oilseed prices downwards, even though petroleum remains at very high levels and the outcome of the war remains highly uncertain. 

In the EU, demand from the biofuel industry is a bit fuzzy as EU and national legislations are counterproductive: RED III legislation is not yet voted in Germany meaning the industry keeps waiting and in EU-legislation there is something called "a blend wall" which caps the authorized volume of rape oil to be incorporated in fuel. Have we already crashed into that "blend wall" then?

Sunflower seed oil

The sun oil market eased a bit, amid limited commercial activity. A price drop of other edible oils and fats as a whole, led to a slight drop in the price of sun oil as buyers remained cautiously sidelining.

The Black Sea market remained quiet. There is availability but the sellers are not aggressive, nor are the buyers. The interest of Indian buyers has remained low, with importers remaining cautious.

In EU, buyer's ideas are too low to attract sellers and buyers of refined oils are well covered. Overall, the market is calm and takes a wait-and-see approach. Also, a lot of market participants were absent due to Easter holidays.

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