Things are going to change.
In February, the weather can go in almost any direction, it can freeze, it can thaw and there may be days that suggest spring is already in the land. Like President Trump it could go either way. A lack of clarity on about everything leaves all doors open.Since Trump took the oath more discussions, diverging opinions and conflicting views on what to expect further pop up. The 'Russian shipping sanctions package' was to wipe out the petroleum supply surplus and drive petroleum prices up. After one week in office petroleum prices are lower. Many analysts were expecting a stronger dollar for many very valid reasons but after one week in office the US Dollar Index closed lower by -0.54% and lost $1.75 (-1.72%) on the week.
The future mostly remains unpredictable.
Meanwhile, concerns remain about President Trump's possible imposition of a 10% or more tariff on Chinese imports next month and any other tariffs on any other trading partners. In addition, adding to overall market uncertainty, the US is transitioning its biofuel tax credit policy to the new administration.
Biofuels
For the Trump administration climate will be a lower priority and may disappear to the background. Trump is opposed to environmental subsidies but biofuels were not banned or disapproved during his first presidency. In the US, 40% of corn production and 50% of soybean oil is used for biofuel production. Biofuels generate income for many and it is an agribusiness that fits the desire to reindustrialize the US.Then it remains to be seen what the blending requirements (amounts of biofuels in petroleum products) from the Environmental Protection Agency (EPA) will be and what the subsidy will be. Normally, the Clean Fuels Production Credit (section 45Z) would come into effect for the period 2025-2027 for the production of low-carbon fuels including aviation fuel. But, all terms of the law are not yet known and it is not excluded that "45Z" gets shelved to introduce a completely new set of rules. Imported raw materials may get hit by new import tariffs or may not qualify for the 45Z subsidy and that could put an end to the large-scale import of Chinese oils (UCO) into the US, which could then be routed to EU, which is already a major importer. American production of biofuels from domestic soybean oil could then increase.
Since this year there is an EU "blending obligation" (ReFuelEU Aviation - Regulation (EU) 2023/2405) whereby aircraft refueling in EU must be done with at least 2% sustainable fuel. The minimum blending requirement will increase in five-year increments from 2% in 2025 to 6% in 2030, 20% in 2035, 34% in 2040, 42% in 2045 and 70% from 2050.
Last week, the Austrian energy and chemicals group OMV announced the construction of a plant near Antwerp to convert organic waste streams such as used cooking oil and other vegetable or animal fats from the food and agricultural sector, into sustainable aviation fuel (SAF). The 'BioHy project' 's annual processing capacity of waste to produce SAF, HVO biodiesel, and other renewable feedstocks for the chemical industry will be 300,000 mt. Additionally, OMV is investing 560 million euros in a Romanian plant to produce abt. 250,000 mt of SAF and biodiesel/yr.
Also last week, in a press release, Eni announced the commissioning of its first plant to produce Sustainable Aviation Fuel (SAF) at the Gela biorefinery, in Sicily. The biorefinery with a production capacity of 400,000 mt of SAF/yr, is capable of meeting one third of EU 's expected SAF demand in 2025. The refinery has an annual capacity to process 736,000 mt of biomass, primarily derived from waste and residual feedstocks such as used cooking oils, animal fat and by-products from vegetable oil processing.
Palm oil
Last Friday, Malaysian palm oil futures ended a second consecutive week of losses due to disappointing exports. According to cargo inspectors, month on month, Jan. 1-20 shipments of Malaysian palm oil products dropped abt. 20%. Although a delay in implementation added to the bearish sentiment, further price declines were limited by Indonesia's push for a more ambitious biodiesel mandate.
Exports of palm oil to EU continue to fall as more member-states discontinue the use of palm oil for energy purposes. Since beginning this year, Italy stopped too and started replacing palm oil by rape, soy and sunflower oil...
High palm oil prices have killed demand and in 2024 India, the world's largest importer of edible oils, imported 38% less palm oil while soybean oil imports went times four and the exports of sunflower oil from Russia to India doubled.
Till now, on the global market palm oil kept trading at a premium to soybean oil. Later in the season a tighter supply of sun oil, and more expensive sun oil, may also bring some price support. And sun oil may well be on its way becoming the leader of an upward price movement in the oil complex.
Soybean oil
In Chicago, soybeans had rebound, mainly due to ongoing weather issues in South America. A good old weather rally! And after Trump's inauguration the sky didn't fall down but soybean prices continued to rise, as Trump has yet to implement import duties for China that still buys from the US. In addition, China temporarily halted shipments from Brazil (supplies 70% of China's bean imports) due to possible pesticide contamination. Last Friday, 'March futures' for beans closed at $10.55/bu. and oil at $0.4522/lbs.Uncertainties remain over US biodiesel regulations and ongoing discussions over tariffs further increase these uncertainties. Nonetheless, the Commitment of Traders report showed that speculators in soybean futures and options added 5,497 contracts to their new net long position of 40,330 contracts as of January 21.
Argentina and southern Brazil are suffering from dry and hot weather leading to lower crop assessments. The Buenos Aires Grain Exchange estimated the Argentine soybean harvest at 49.6Mmt, down 1Mmt from their previous estimate (52Mmt according to the USDA). But compared to Brazil's surplus over last year it is neglectable. Brazilian ABIOVE raised its '25 soybean crop forecast by 3Mmt to 171.7Mmt, compared to its December projection. A harvest between 165 and 170Mmt would be 15 to 20Mmt higher than last year.
Analysts continue to anticipate a record harvest for all of Brazil, Argentina, Paraguay, Bolivia and Uruguay, which will keep the market under pressure. In addition, Argentina announced a reduction in export taxes until June 2025 for several products to boost exports: from 33 to 26% for soybeans and from 31 to 24.5% for meal and oil.
Therefore, large quantities of soybean oil should be available in 2025 but many palm oil consumers are still switching to cheaper soybean oil, which keeps demand high. In 2024, the global crush of soybeans by China, Brazil, the US and others was abt. 25Mmt above 2023, a trend that is likely to continue into 2025 and boost global soybean oil production by abt. 4Mmt to 67Mmt this season.
The weather forecast improved with chances of rain over Argentina and cooler temperatures, but after that it looks set to be hot and dry again. So, while the rain is helpful more is needed for the rest of the growing season. Crop conditions in Brazil are good to excellent and according to the Companhia Nacional de Abastecimento (Conab) the Brazilian harvest was 1.7% complete, compared to 4.7% last year. Harvesting was delayed by rains but the bulk of the harvest is only due march onwards. And Argentina just completed all plantings.
Going forward, a lot, if not all, will now depend on the biofuel policy the Trump administration will develop.
Rapeseed oil
In EU, seed prices remained under pressure from an ample cheaper supply of Canadian and Australian seed, from lower gasoil prices, from weakness in palm oil and from a weak domestic demand that, for now, prevented any upward breakout. On October 28th "February '25 rapeseed futures" were at €502.50/mt and, after a volatile ride, last Friday closed at €521.50/mt.
Accelerated imports were noted and (the threat of) a US 25% import tax on Canadian products by February 1st could further increase the downward pressure from this origin. Also unclear is the impact from the potential trade flow change of Chinese UCO and waste oils from the US to EU, following a change in US biofuel subsidy rules. A massive influx of Chinese UCO in EU could pressure rape oil but might be positive for soybean oil in the US, which could trigger higher prices elsewhere.
The first estimates are shaping up for this year's EU harvest. A lower acreage than last year is expected to get compensated by higher yields/ha and estimates are for a crop about 2Mmt higher than in 2024. Coceral's December forecast for total EU including UK, UA and Serbia is 24.12Mmt vs 22.203Mmt in 2024. Oil World sees the EU-27 crop at 19.1Mmt vs 16.83Mmt in 2024. And although growing conditions for winter rapeseed look good, it still needs about 6 months of growing.
Rapeseed oil prices also weakened but this trend must be monitored closely if and when more physical oil demand kicks in again as the EU rapeseed crop has been smaller than last year. A lot of EU seed has already been crushed in the first half of the season and the season will end with very low carry-out stocks.
Sunflower seed oil
As processors and exporters wanted to get ahead of the implementation of an increased export tax, Russia has processed significantly more sunflower seeds in recent months than was normal and initially estimated. This despite a smaller harvest compared to the previous year. So, this means less seed availability for the rest of this season that runs through September and less oil available for export mainly to Asia (due to sanctions it cannot come to EU).
Estimates of seed production for the last campaign in EU-27 and Ukraine were further reduced and while Russia may have more than first estimated, this is causing supply problems for seed processors and many crushers are struggling to buy enough seed to keep mills running at full capacity. Less crushing, also means less oil and so the price premium over rapeseed and soybean oil in the EU continues to grow. January was a quiet month for seed sellers in Ukraine and sunflower oil supplies are tightening in most export locations but also in EU.
Globally, seed production this current season is now seen down 5.2Mmt from the 2023/24 season, out of a total production of nearly 54Mmt. However, total availability fell by 7Mmt due to already low stocks at the beginning of the season. EU-27 production was revised down from an expected record of 10.5Mmt to 8.5Mmt. There is less seed to process than normal for the rest of the season and the season will end with a lower than desired carry-out, which could further increase seed and oil prices. Soybean oil has been keeping a lid on price rises but what will Trump do with his biofuel policy?
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