Biofuels boost vegetable oil market

Like other commodities, the trade in vegetable oils is quite volatile. This is partly due to unrest in the Middle East. Biofuel policy is another important factor. Indonesia stands out in this regard. The country plans to increase the blending mandate for vegetable oil in diesel from 40% to 50%.Palm oil had been rising sharply until the beginning of this month. Prices on the Malaysian exchange have since eased somewhat. The Indonesian decision to increase the mandatory biodiesel blending rate to 50% (B50) from 40%, effective July 1, 2026, could give palm oil prices another boost, according to some analysts. This is because palm oil will be used more extensively as a biofuel. Domestic demand for palm oil in Indonesia is likely to grow significantly, limiting the amount available for export to the global market.Indonesia is one of the largest producers of palm oil. By increasing the blending mandate, the Indonesian government aims to reduce dependence on fossil fuels and is responding directly to geopolitical threats, such as risks surrounding the situation in Iran. Earlier this month, palm oil peaked at 4,839 ringgit per ton, the highest level since December 2024.Geopolitical tensions Among vegetable oils, soy is perhaps the most affected by geopolitical tensions. Demand for soybean oil is growing particularly in North America for blending into diesel. In that sense, relatively high crude oil prices are beneficial for soybean processors.China remains a major buyer of soybeans on the global market. This is not necessarily favorable for US soybean farmers under President Trump. Amid developments in Iran, it is easy to forget that Trump is also engaged in a trade conflict with China. The growing ties between China and Iran could potentially cause further market unrest.Meanwhile, the soybean harvest in Brazil is well advanced. Yields are reported to be good, according to various local sources. This limits the upside potential for soybean prices, according to some analysts. It also matters that China relies heavily on soybean imports from Brazil. Fewer sunflowers in Ukraine Sunflower oil prices are trending slightly downward. This is remarkable because the National Sunflower Association reduced its crop estimate for Ukraine by 19% compared to the previous season. Ukraine is one of the largest producers of sunflower oil. The war in Ukraine continues to create additional tension in the market. Confidence remains fragile due to the ongoing conflict between Ukraine and Russia.For the EU, the National Sunflower Association also expects a smaller sunflower harvest. Some analysts suggest that if fertilizer remains expensive, the sunflower acreage in the EU could expand slightly at the expense of crops like maize, which require relatively high nitrogen inputs.Nevertheless, sunflower oil prices remain at a relatively high level compared to the long-term average, partly due to limited supply and ongoing logistical challenges. EU rapeseed imports lagging Rapeseed cultivation has become increasingly challenging within the EU. The largely discontinued use of seed coatings has heightened cultivation risks. Although rapeseed has lost some popularity in the EU in recent years, imports into the EU are currently 1.7 million tons below last season’s level. Up to April 7, a total of 3.6 million tons of rapeseed had been imported, according to European Commission figures. Ukraine is the largest supplier with 1.4 million tons, followed by Australia with 1.1 million tons.