March 4, 2025 – Global vegetable oil markets experienced significant downward pressure this week as escalating trade tensions and shifts in export patterns reshaped supply and demand dynamics. Vesper’s latest market analysis reveals how tariff announcements are creating ripple effects across palm, soybean, rapeseed, and sunflower oil markets.

Palm oil markets under pressure despite tight Malaysian stocks

The benchmark BMD CPO price decreased to $1,049/mt from $1,074/mt compared to last week, primarily driven by three factors:

  1. Lower Malaysian palm oil exports (down 10.95% in February to 1,061,765 mt)
  2. Bearish sentiment at the Palm Oil Conference (POC)
  3. Escalating global trade wars

However, our analysis indicates that tight Malaysian stocks could provide a temporary price floor. Reuters and Bloomberg expect Malaysian stocks to decrease to a record low of 1.5-1.6 million mt in February, down 6% due to production challenges caused by heavy rainfall.

Meanwhile, Indonesian exports increased by 39% to 1,862,640 mt in February, partially offsetting the Malaysian export decline.

Trump tariffs spark global trade war in vegetable oil markets

The vegetable oil complex faces significant uncertainty as the Trump administration announced a series of aggressive tariff measures:

  • 25% tariff on Canadian and Mexican goods
  • Additional 10% tariff on Chinese imports (bringing the total to 20%)
  • Potential new tariffs against the European Union

These measures have already triggered retaliatory actions, with China implementing a 10% increase on US soybean imports. Canada and Mexico have also announced plans to retaliate, though specific measures have not yet been detailed.

The soybean complex has been particularly hard hit, with CBOT soy oil prices tanking to $946/mt from $1,008/mt last week, while CBOT soybeans fell to $367/mt from $378/mt.

Long-term outlook: bearish signals for 2025

Looking ahead, Vesper’s proprietary machine learning model projects a downward price trajectory for BMD palm oil, forecasting an average price of:

  • $1,025/mt in March
  • $1,000/mt in May and June
  • $1,020/mt in September

This aligns with the consensus view at the POC that palm oil is currently overpriced relative to market fundamentals. Despite tight current supplies, analytical houses at the POC forecast production recovery in Indonesia throughout 2025, coupled with lower imports by price-sensitive countries, which is expected to weigh on prices in the longer term.

Additional bearish factors include:

  • Seasonal recovery in palm oil production beginning in April
  • Brazilian soybean production expected to reach a record high of approximately 170 million mt
  • Possibility of expanded sunflower acreage across Europe, Ukraine, Kazakhstan, and Russia for the 2025 season

Market impact across oil segments

The trade war impacts extend beyond palm oil:

  • Soybean Oil: Chinese buyers are likely to pivot from US to Brazilian and Argentinian supplies, putting US exporters in a difficult position.
  • Rapeseed Oil: The US biodiesel sector, a key outlet for Canadian canola oil, may shift toward soybean oil following the tariffs.
  • Sunflower Oil: While prices have declined in response to the general downward trend, supply remains tight in Ukraine, creating regional imbalances.

Key data points to watch

  1. Implementation timeline for Indonesia’s B40 biodiesel mandate, which remains a critical swing factor
  2. China’s soybean import patterns (current stocks stand at 8 million mt, 6% below the 6-year average)
  3. Progress of Brazilian soybean harvests (currently 50% complete, ahead of last year’s pace)
  4. Further developments in trade negotiations and potential additional tariff announcements

For a comprehensive analysis and detailed insights into specific vegetable oil markets, read our full Week 10 report here: https://app.vespertool.com/market-analysis/1762