UFOP: Crude oil sets the pace, vegetable oils pick up momentum

Vegetable-oil prices edged up at the beginning of March.

After the escalation in the Middle East, crude oil surged, incorporating a considerable risk premium.

Since then, the oil-price shock has been affecting agricultural markets primarily via the energy and biofuel markets, providing particular support for vegetable-oil prices.

Higher crude-oil prices tend to improve the competitive advantage of biodiesel and, consequently, also the demand outlook for soybean and rapeseed oils.

At the end of March, asking prices for soybean oil were at 1,155 euros (USD$1,352) per metric ton free on board (FOB) German mill, up approximately 6 percent from the end of February.

The U.S. biofuels policy provided additional support.

This price level, however, could not be maintained as the situation developed, with prices recently falling to around 1,105 euros (USD$1,293) per ton.

Rapeseed-oil prices were at roughly 1,165 euros (USD$1,363) per ton on April 21, representing a nearly 18 percent increase compared with the same time a year ago.

Demand remained generally muted.

Market participants acted with restraint, observing further developments.

The increasingly tight supply of rapeseed-oil raffinate has so far failed to stimulate further purchases.

From the perspective of the Union zur Förderung von Oel- und Proteinpflanzen e. V. (UFOP), the extent to which the resolution adopted by the German Bundestag on the future development of the greenhouse-gas quota will affect the national market remains to be seen.

Other EU member states are also required to transpose the Renewable Energy Directive (RED III) requirements into national law.

The higher RED III targets give reason to expect that quota obligations for biofuels will have to be raised in all member states.

UFOP expects EU rapeseed production to benefit from the more ambitious quota requirements.

In view of the 2026 harvest and sowing, the association said it anticipates a sustained supportive effect on oilseed prices.

UFOP also pointed out that the amount of biofuels derived from rapeseed oil and other crops used is limited due to national caps.

Against this backdrop, the association sees no reason to revive the “food-vs.-fuel” debate.

Palm-oil prices have also increased since the beginning of March and recently climbed to the top of the vegetable-oil price ranking, reaching the equivalent of 1,345 euros (USD$1,574) per ton.

Particular support comes from expectations of rising demand for biodiesel in the two largest palm oil-producing countries, Indonesia and Malaysia.

These expectations could limit the export potential of the leading palm-oil suppliers and tighten global supply.

On the other hand, prospects of record global palm-oil production and a simultaneous slowdown in demand could counteract these price‑supportive factors.