The specter of trade wars.

Nothing is certain anymore.

Global sentiment turning bearish.

Fear rules. A great depression looms.

Although nobody can predict what to expect from weather, wars, politics, diseases or plagues that can spread, etc..., agricultural markets always prepare for everything. The latest added challenge is President Trump’s unconventional use of tariffs as a policy tool. His last move however took the market by surprise as the tariffs were bigger and there were more countries involved in the reciprocal tariff plan than anticipated.

The announcement on “Liberation Day” led to a lot of commotion and discussions and shook investors’ confidence. The majority of the commodity and outside markets went down sharply. Recession and depression talk started buzzing. Stock markets and petroleum prices plunged on: “wealth-destroying madness, stop making sense and prepare for chaos, fixation on trade deficit is not policy but improvisation, inflaming stagflation fears, disruption of supply chains, contraction of global trade, panic selloffs, a classical ‘Keynesian negative multiplier’, incompetence, levels not seen since the 1930s and the days of the Great Depression” …

It's hard to say if markets overreacted too quickly as no one knows how long the tariffs will remain in place, whether agreements can be reached, whether there will be numerous, severe, long-term countermeasures, whether this was just to create chaos.

What is certain is that nothing is certain anymore.

It could be these tariffs are more bark than bite, an opening move in negotiations to pressure trading partners to make concessions. If so and if they do, stock markets and commodity prices may rise again. But until then, buckle up for the ride!

Fundamental problem.

The fundamental problem and weakness of the US is the budget deficit paired with an unsustainable government debt. The aim of the tariff battle is manifold: achieve a lower dollar to stimulate exports, lower inflation, lower interest rates to stimulate the economy and to make the interest burden more bearable, and to bring the (strategic) manufacturing industry back to the US. Trump does not believe or take for granted that it is a law of nature that advanced economies (must) structurally deindustrialize and he doesn’t want dependencies to become vulnerabilities. And he believes in corrective action.

All very legitimate, but the question arises whether balancing the trade deficit with higher import tariffs contributes to achieving these goals. The import country the U.S. of A., which accounts for merely 13% of all worldwide imports, now levies a total of 54% import tax on Chinese goods. The export country par excellence, China, with production overcapacity and where allegedly companies with government support can operate at a loss, retaliated for this “unilateral bullying behavior” with 34% extra import duties on top of the existing trade tariffs for American goods. Canada, Mexico, EU and others may also boldly (?) react. The outcome remains uncertain.

Consumers and businesses put on hold, postpone, if not cancel, their purchasing and investment plans. If this lasts too long it will show in economic data and company profits, and lead to extra caution. It makes long term planning more difficult as companies won’t know what costs / import duties to expect and how trade flows and availability will evolve. Will US soybeans still be profitable to crush in EU and at what price can soybean oil and meal be offered? Also, what will farmers do, not only in the US but also elsewhere?

It already seems ages, but Donald Trump has only been president of the US since January 20th. The world still faces 3.75 years of Trump and the impossibility to predict what Uncle Donald may still pull out of his sleeve during that time. Interesting times.

Petroleum and BioFuels.

Petroleum had firmed to its highest level in a month after the tightening of US sanctions against Iran, and the announcement that the US would impose 25% tariffs on all countries buying oil or gas from Venezuela from April 2nd onwards. But on ‘Liberation Day’, fears over economic growth took over. Fears that a global trade war could drive the world into a depression, cutting back global industrial activity and reducing petroleum and gas demand, sent energy prices in crisis mode. Brent crude dropped to levels not seen since 2021 and the sharp drop increased pressure on edible vegetable and animal oils and fats prices.

Biodiesel in the US

For the first time in years, global biodiesel production is expected to decrease, by about 3% this year compared to about 7% growth last year. However, about 20% of the world’s total production of edible vegetable and animal oils and fats continues to go to biodiesel production. The drop has several causes, one of which is trade tariffs, in addition to low diesel prices. Brazil and Indonesia are still seeing growth; a large decline is seen in the US.

A lack of support from the Trump administration, despite support from individual political representatives and individual states, has pushed the US biofuels industry into crisis. The market awaits decisions on the increase of biodiesel blending mandates in 2026 and because the government may cut public spending the subsidies may not be as large as hoped, putting viability/profitability at risk and/or making the fuel more expensive.

Meanwhile, the administration asked the petroleum industry and biofuel producers to agree on the next phase of the country’s biofuels policy. Competition between the two industries diminished over the years as major petroleum refiners have invested in biofuel production capacity — essentially switching from fossil to renewable production. Any agreement reached between the two could be adopted by the Trump administration.

The Renewable Fuel Standard (RFS), a federal program that requires corn-based ethanol and other biofuels to be blended into the US’s fuel supply, will remain and the Environmental Protection Agency (EPA) is to prepare new blending mandates under the RFS setting volumes for the next two to three years, and work out implementation modalities on the program's compliance credit market. The petroleum and biofuel coalition agreed to recommend the EPA to significantly increase the renewable diesel and biodiesel mandate in the next two years since current production capacity largely exceeds the current blending requirement.

Equally crucial in the discussions, besides the future mandatory blending volumes and exemptions for small refineries, is the fate of a new tax credit created for biomass-based diesel under the Biden administration but not yet finalized. The program, known as 45Z, replaces a flat rate of $1 per gallon for blenders and instead rewards producers based on the carbon intensity of their fuels. It was not yet decided on whether to continue with 45Z. Some want compensation for blenders, others support the new 45Z tax credit for producers.

It is important to understand that in addition to US federal law, there are separate state laws that also vary widely. For example, in Illinois, as of April 1, the diesel fuel blend will go from the current B14 to B17. “This means 17% of every gallon of biodiesel sold in Illinois will be derived largely from domestically produced, renewable vegetable oil, with soybeans being the top contributor by far. In 2026, the minimum biodiesel blend levels eligible for a state tax exemption jump to 20%”, the Illinois Soybean Association (ISA) shared with Aveno and the rest of the world. These situations make it as complicated to follow up on biofuels as it is in EU.

Palm Oil

Last Friday Malaysian “June’25 palm oil futures” settled at Myr 4489/mt (last done 4329). China’s import taxes on Canadian rapeseed oil and meal had given some support to palm oil futures in Malaysian, due to an expected shift in Chinese demand towards other vegetable oils. Stronger bean oil also helped. But then Trump surpassed the Chinese and the Bursa Malaysia dropped amid worries that reciprocal tariffs could weaken the global economy and tone down palm oil demand further.

Demand has been weak due to high prices on lower production and low stock situation and due to cheaper rival oils. But as workers return to plantations after the Eid-al-Fitr break and the seasonal production upswing kicks in, supply should become more ample from now on. The Malaysian Palm Oil Board (MPOB) will release its monthly data next week and the market expects that for the first time in six months March stocks are already up on a surge in production. General expectation is for prices to slip further. The impact of reciprocal tariffs for palm oil producers has seemingly not yet been fully factored in.

Soybean oil

The prospective plantings data from March 31st estimates the US soybean planted area at 83.5 million acres, a 4% decrease from last year. Corn acreage is up 5%. But weather can still influence these plans and beans can be planted later than corn. More worrisome for farmers is that China may still cancel soybean purchases that they still have in the books.

In response to reciprocal tariffs, China placed a retaliatory tariff of 34% on all US goods starting April 10th on which soybeans went in collapse mode late last week. Over the week May beans sank $0.46, May meal fell $10.40 but oil held a 68-point gain.

Soybean Oil futures in Chicago had support from anticipation of a sharp increase in domestic soy oil demand due to disappearing Canadian rapeseed oil imports through tariffs (later that story changed). Oil futures also firmed following positive biofuel news: the announcement of talks between the petroleum and agricultural industry, at the request of Donald Trump, resulting in a proposal to the EPA for a significant increase in blending mandates, fueled market optimism with oil rallying to a two-month high. Managed money flipped from short to long buying bean oil futures and options contracts. But all this must still go through all levels of government to become reality and some analysts referred to a classic “buy the rumor and sell the fact” story. On April 2nd oil futures rose above $0.48/lbs. to fall to $0.4584/lbs. on Friday

The lack of policy clarity has led many to assume the worst, and biodiesel plants have slowed production or abandoned it altogether. If this uncertainty persists, the biodiesel/renewable diesel industry may shrink further, sometimes painfully, but it won't disappear.

Rapeseed oil

In the EU, rapeseed prices were on the rise recently, benefitting from the recovery in petroleum prices and the prospect of reduced Canadian acreage. The trend benefited particularly from a bullish reversal in rapeseed futures in Winnipeg, in a market anticipating a very significant reduction in Canadian acreage this year given the Chinese and American tariffs that have hit the sector. As Canadian rapeseed seemingly escaped from “reciprocal tariffs” it will be interesting to see how that plays out in the weeks to come.

The entire biodiesel activity found also support from a short-lived bullish petroleum rally until President Trump announced tariffs, which caused energy markets to collapse.

Gains were capped by sustained import flows from Canada and Australia, while domestic demand remained muted, both for the previous and upcoming crop. In February, rapeseed crushing dropped to its lowest level in six years the federation representing the European Vegetable Oil and Protein Meal Industry shared with the industry.

For oil, the nearby positions remain increasingly tight! And the tight physical non gm rapeseed oil supply keeps prices in a firm inverse. It seems non gm oil and seed will be scarce till the new crop hits the market in August.

Sunflower seed oil

There wasn’t much action as selling ideas and buying ideas remained too far apart to come to business. The whole tariff situation and relaxed coverage levels too contributed to low market activity.

Not fundamental changes and sun oil remains the most expensive of the major four oils and so it does not prompt additional demand at these price levels and pushes eventual buyers to cheaper alternatives. Export supplies of sun oil, especially in the Black Sea region are drying up. A report from India showed soybean oil imports in March rose 24% to 352,000 mt month-on-month. Sun oil imports dropped 15.5% to a six-month low of 193,000 mt. India imports soy and sun oils from Argentina, Brazil, Russia and Ukraine.

Due to a lack of demand sun oil struggles to develop independent strength and follows what rival oils are doing. Nevertheless, the April-September period is seen as a period of tightness and the premium over other oils is to remain strong.

Olive oil

"The rain in Spain stays mainly in the plain" and makes plenty of grain. Abundant rains over Spain have also made a much better olive oil production and lower prices. A total production of about 1.45Mmt is expected for Spain in the 2024/25 season.
Through the rain many buyers hope for still lower prices after the flowering period, May onwards. Although it is still early, the improved condition of the olive trees already suggests that the next harvest will also be abundant and will continue to weigh on prices.

On the other hand, there are production losses in Italy, and in Spain excessive wetness had some negative effect on the quality of the current crop. This supports prices of good quality “extra virgin” oils.

It is too early to say what US import tariffs will do to global consumption of olive oil. Lower prices, after demand killing prices last season, may compensate import tariffs. Wie zal ‘t zeggen? If a high price drops 50% and you add 50% import taxes to the lower price, the result is still lower than the high price. The question always is: is it affordable?

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