In the fog.
“Uncertainty” continues to be the main theme in these foggy markets. Donald Trump's extreme and contradictory announcements are maintaining a heavy blanket of uncertainty over the market further increasing downward pressure on the entire oilseed complex.
With economic uncertainties and geopolitical tensions persisting, most participants hesitate and adopt a cautious, wait-and-see attitude. Israeli air strikes on Gaza, strikes on the Houthis in Yemen and Ukrainian drone attacks on Russia contributed to dampening risk appetite and strengthened the appeal to being safe rather than sorry.
Amidst low consumer confidence, slow food service and shrinking retail sales in many economies, most players (not knowing what volumes nor what prices to expect next month, let alone what to expect next quarter or next half year) remain cautiously on nearby business in a hand to mouth mode. This is seen in all segments of food, feed and energy market as so many got very risk averse having no clue where all this is heading.
Other concerns are bird flu and exploding egg prices and soaring global beef prices due to diseases and shrinking herds. On supply constraints livestock markets now favor the bull side. In the US, drought has led to the smallest cattle herd since 1952, with limited supply also seen in Canada and Mexico. Brazil and Australia have increased meat exports, but far from enough to curb rising prices. Top producer France too saw a significant fall in livestock and expects production to further decline. Steak prices soar on an unstable supply worsened by slaughtering younger cattle. The impact on animal fat production and oil meal consumption (especially by chickens) is yet to be fully assessed, but it doesn’t inspire much confidence in what’s coming.
Petroleum and Biofuels
Never waste a crisis.
The entire biofuels sector is being battered by weakening economies and weak petroleum prices moving up and down on several disparate signals. On Friday last, petroleum ended its second consecutive week of price gains with Brent sustaining above $70.
Tariffs could slow global economic activity and curb fuel demand. There was talk of Trump administration officials wanting petroleum prices at $50 to curb inflation.... On the other hand, summer driving season is just around the corner and to support Trump's pledge to bring Iranian petroleum exports to zero, a fourth round of sanctions was announced by the US to “cut off the revenue source that allows Tehran to continue funding terrorism and its nuclear program”. And then there’s been OPEC+ blowing hot and cold at the same time.
Low fossil-diesel or gasoil prices and high vegetable and animal oils and fats prices have been squeezing biodiesel producer’s margins around the globe: crude soybean oil in Argentina is $318/mt more expensive than gasoil; crude palm oil FOB Indonesia $490/mt.
More concerns rise about the cost and funding of biofuels. The latest was the announcements of intentions to implement higher export duties on palm oil to raise money to finance Indonesia’s mandated increase of palm oil-based biodiesel usage. In the world's third-most populous country, economic indicators including health of government finances fueled worries about Indonesia's growth prospects after a series of data showed weakening purchasing power and consumer confidence.
In the US the biodiesel sector is in crisis due to a lack of support from the federal government. The Trump administration has not renewed the subsidy program that expired at the end of 2024 and frantic efforts by bipartisan stakeholders from typical agricultural states to unblock the issue gave no results. Biodiesel production is estimated to be about 35 to 40% lower than a year ago in February. The US is paying more interest on its national debt than it is spending on defense.
A lagging demand for biodiesel was also observed in the EU.
When the going gets tough, the tough get going. And being able to grow or hold out during a down cycle creates a competitive advantage. But it’s tough!
Palm oil
In Kuala Lumpur, ‘June’25 Palm Oil Futures’ closed lower last Friday at MYR 4376/mt despite low production and low stocks, and pushed down by still-disappointing export rates and the prospect of a slowdown in Chinese demand. The decline was also due to concerns over the impact of rising US tariffs on the global economy and global demand, on continued weakness in the soybean complex and on the fact that palm oil remains too expensive in/for most markets/uses.
Soybean oil
The soybean complex continues to be affected by the trade wars waged on various fronts by the US and by the good progress of the Brazilian harvest, estimated this year at a new all-time record. A rebound in the dollar index and improved growing conditions in Argentina too weighed on the market in recent weeks. It should however be noted that the Buenos Aires Grains Exchange reduced its estimate of Argentina's soybean harvest this year and now sees the crop at 48.6Mmt, down 1Mmt from its earlier forecast of 49.6Mmt (50.2Mmt last year). Other analysts go even to 46.5Mmt.
The export season for US beans to China is coming to an end as China turns to the new Brazilian crop. In Chicago, ‘Soybean Oil May '25 Futures’ settled at $0.4201/lbs on March 21st and ‘Soybean May '25 Futures’ at $10.09/bushel.
Bulls and bears are expected to continue to debate exports and tariffs and their impact on the complex, recession fears in the US and uncertain US biofuel policies… while domestic soybean oil consumption in the US is trending down and stocks are building; mostly on muted biodiesel production.
During Jan/Feb domestic oil consumption in the US dropped abt. 20% and the lower reported February bean crush number by the National Oilseed Processors Association (NOPA) illustrates the lower crush margin coming from a slowdown in oil and meal demand. It must be said that global demand for soybean oil is still expanding and the US also exported oil to global markets.
The markets also anxiously await the ‘reciprocal tariffs’ impact after April 2nd.
Rapeseed oil
The US-Canada trade war is causing damage. Half the Canadian rapeseed production is processed into oil and meal and about all of the oil produced and two-thirds of the rapeseed meal are exported to the US. And are at risk of being taxed. The remaining third of the rapeseed meal (2Mmt), is usually exported to China, which recently imposed 100% import duties on these Canadian products - in retaliation for the taxes on Chinese electric vehicles. Such will lead to a sharp decline in Canadian rapeseed processing.
This double whammy, from China and the US, will shut down outlets for Canadian seed and shift that supply to Europe at discounted prices. This has already led to a drop in Canadian rapeseed futures in Winnipeg which dragged down European prices.
Weeks before planting begins end April-begin May, StatCan predicts a drop in the Canadian rapeseed acreage this year. And given current price trends, this acreage is likely to be revised downwards again very soon. Shipments of Canadian seed are still arriving in EU. (Although China has not taxed rapeseed itself (only derived products) seed is still subject to an earlier imposed “anti-dumping investigation”. Taxing is not off the table. Or this may be a hint to negotiate)
Chinese tariffs on Canadian rapeseed products took effect on March 20th. After a sharp drop in rapeseed futures in Canada and EU caused by US and Chinese measures, the decline slowed by fears of a drop in upcoming plantings. In EU, rapeseed markets partially recovered after falling to a low of €466 on Monday last week.
Rapeseed oil followed and rose 7% in three days: rapeseed oil is regaining strength as prices were too low compared to palm and sun, despite the smaller non gm EU crops. Increasing oil prices, particularly for the old crop, reflect the tight stock situation in nearby oil. The recent decline in oil prices created more demand in recent weeks, and with a lower production, stocks got tighter. Non-GM oil supply is expected to remain tight for the remainder of the season!
Sunflower seed oil
Sun oil prices moved sideways in a range looking at what rival oils were doing. There was very little interest to trade or buy. It seems consumers are well covered. But the premium over rape and soy oil remains strong.
On the seed side there is no or little farmer selling and the market’s attention will be shifting more and more to weather and planting of the next crop.
In Argentina the harvest is still in full swing and almost 50% finished. Given the shrinking supply from the Black Sea region the Argentinian players are trying to take full advantage of the current good prices on the world market by accelerating the harvesting pace, processing the seed and exporting the products.
LINSEED OIL
Because of the trade restrictions on Russian products, less (but more expensive) linseed came to EU resulting in less processing and thus less production of linseed oil and linseed cake.
On top of that the global linseed production in the 2024/25 season is counted to be the lowest in six years. High prices will have to do the job of demand rationing in order to create a new market equilibrium.
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