Politics drives volatility in vegetable oil prices

The market for vegetable oils is currently experiencing a period of strong volatility. Not only traditional supply-and-demand factors play a role, but trade agreements, biofuel policies and extreme weather conditions also determine market direction. India imported significantly more palm oil in January, and the expectation is that Demand is expected to increase again in 2026, as palm oil remains sharply priced below soybean and sunflower oil. At the same time, Malaysian production is affected by heavy rainfall and flooding. Production in February could be 15% to 17% lower month-on-month. This has direct consequences for supply and processing. Despite this production pressure, the price remains relatively stable. On the futures market in Malaysia, palm oil continues to hover around 4,020 Malaysian ringgit per ton. Compared to the end of January, this represents a decrease of around 300 ringgit. According to some sources, this is due to moderate export levels. In February, the volume was 12% to 16% lower than in January. Sunflower oil remains firmly pricedThe sunflower oil market has experienced tightness in recent months due to logistical problems in the Black Sea. Now it seems there is a brief pause. The futures market has slightly dropped from its peak earlier in February to $1,685.97 per ton. Downward pressure on the market mainly stems from cheaper alternatives from South America. As a result, buyers have more alternatives available. Nevertheless, the market remains sensitive to geopolitical and logistical risks around the Black Sea. Buyers are price-conscious. If palm oil remains the cheapest, buyers are expected to choose it over other options, various analysts suggest. The substitution towards palm oil is therefore a logical step for many consumers. Canada benefits from slightly better relationship with ChinaThe momentum in the canola market is currently with North America. Canola futures in Canada rose above 690 Canadian dollars per ton last week. This is the highest level since July 2025. The market is being driven by two factors. The first is the normalization of trade between China and Canada, whereby China will temporarily lift tariffs on canola meal starting March 1. The other factor is the US biofuel policy, which creates structural demand for vegetable oils. Plans to make blending obligations for refineries in the US stricter will lead to more demand for vegetable oils as raw materials. The final quotas for 2026 and 2027 are expected at the end of March. This is indirectly relevant for European canola quotations, but it does set the tone for the international market: as long as biodiesel and export opportunities increase, there will be a policy floor under canola oil. Soy oil on the riseSoy is mainly driven by speculative demand. Indonesia has struck a trade deal with the US whereby the country commits to significantly increase imports of American agricultural products. The targets for soybeans of approximately 3.5 million tons and soybean meal of about 3.8 million tons are ambitious and far exceed current import volumes. However, it remains to be seen whether Indonesia will actually import these volumes. The government has designated state-owned company Berdikari to handle all feed grain imports starting in 2026. This seems logical, but could be difficult in practice according to some experts.Biofuel as an impetusSoy is also benefiting from the broader energy and biofuel picture. The debate in Washington over blending obligations could increase demand for biodiesel feedstocks, which directly impacts the demand for soy oil and soybeans. The market is responding to this. Soy oil is reaching new highs and soybean meal is at its highest point in ten weeks. At the same time, there are challenges: Argentina is struggling with limited bean availability for crushers, which restricts the export of soy products. In Brazil, there are concerns about a smaller harvest and quality issues due to drought. The total Brazilian harvest remains large and is expected to approach a record harvest.