Agricultural commodities are having a bad time of it lately. Whether it’s corn, cocoa or coffee, crops worldwide are being pressured increasingly by unpredictable weather patterns.
The latest victim – or multiple victims – are vegetable oils. The prices of rapeseed, sunflower and palm oil have all tracked upwards in recent months due to climate pressures, exacerbated as global markets react to uncertainty around tariff barriers erected by the United States.
Why are vegetable oil prices rising? Recent price rises have been driven by volatility caused by the US’s tariffs, according to Roxanne Nikoro, oilseeds market reporter at Expana.
“Recent volatility came from uncertainties surrounding the ongoing trade war between the US and major vegetable oil trading partners,” she explains.
“Due to weather-related and tariff uncertainties, price trends have been mixed; with volatility across all markets.”
Before this, the high prices of vegetable oils were primarily driven by palm oil prices, explains Food and Agriculture Organisation (FAO) economist Di Yang. When prices spiked last year, this sent buyers to cheaper alternatives.
Also read → 2024’s palm oil price spike explained High palm prices were driven by unusually dry weather conditions and the deteriorating age structure of oil palms in South East Asia, which meant yields were less than expected.
Weather patterns in Malaysia and Indonesia drove palm oil up to their highest point since July 2022 in February, explains Expana’s Nikoro. Flooding in Malaysia has exacerbated this, curtailing production.
The price of palm oil, usually the price floor in this area, has risen to the price ceiling. Much as happened last year, buyers have been driven to other oils by the rise, although this lower demand has meant prices have since come down slightly from February’s heights.
However, other vegetable oils have also been affected. For example, according to FAO’s Yang, rapeseed and sunflower oil prices have been driven up due to poor growing conditions in the 2024/25 season, lowering outputs.
Rapeseed and sunflower oil peaked in Q4 last year, according to Expana forecast analyst Jamie Pakenham-Walsh.
Prices of soy oil rose for a different reason, in response to the increased demand due to tight supplies of other oils, in spite of ample supplies.
On top of this, biofuel remains a factor. Mandates for the level of biodiesel required for blending into fuel have risen in Indonesia (from B35, or 35% biofuel, to B40, or 40%) and Brazil (from B12, or 12%, to B14, or 14%), increasing the demand for vegetable oil and driving up prices.
However, biofuel producers are being hit hard by rising prices. A combination of high vegetable oil prices and low crude oil prices has meant that margins for biodiesel have declined, explains FAO’s Yang.
What regions are affected the most? India is the world’s top vegetable oil importer, but imports to the country are expected to decline for the second consecutive year in the 2024/25 season due to demand rationing, Yang explains.
Imports to other major markets, such as the EU and China, are likely to remain low. Higher soy oil supply, Yang says, can only partially compensate for the lessened availability of other oils.
When will prices start to decline? The big question is, will such prices begin to decline, and if so, when? Well, it’s complicated.
Weakness in the macro-economy may accompany a decline in some oils after May, suggests Expana’s Pekenham-Walsh, although since soy oil prices are are already low, it may be resistant to further decline.
Tariffs also remain a factor. “That is a fluid situation that is likely to affect the oils individually, depending on their import/exports to the U.S. This is something that we are continuing to evaluate as we get more information.”
The US, and its major trading partners such as the EU, China, and Canada, are likely to experience some volatility, explains Nikoro.
Other markets, however, could benefit. “Brazil is poised to become the main beneficiary of the shift in demand, with Argentina and Paraguay also benefitting, sources tell us. With harvests in Brazil and Argentina progressing positively, the market has shifted its focus to soybean plantings with the US set to plant less beans with the tariff dispute leading farmers to favour plantings of other crops, industry insiders commented.”
Alongside the US’s tariffs, China’s imposition of 100% tariffs on Canadian canola oil and meal is also bearish for Canada’s market.
Finally, Nikoro points out that the Russia-Ukraine war also remains a “key driver” of the sunflower seed and oil market.
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