China soybean oil prices to face pressure once crude support fades

While China's edible oil market is currently supported by ongoing conflicts in the Middle East and strong international crude oil prices, the soybean oil prices are expected to face pressure once such support fades.

In detail, China's soybean oil futures and spot prices are gradually moving higher, while basis remains strong for near-term contracts but weak for forward contracts. As of April 23, soybean oil basis (against Y2609) in China remained soft, with Panjin basis at Yuan +180/tonne, Tianjin basis at Yuan +150/tonne, Rizhao basis at Yuan +150/tonne, Zhangjiagang basis at Yuan +280/tonne, and Dongguan basis at Yuan +320/tonne.

Earlier, expectations surrounding Indonesia's B50 biodiesel policy and the prospect of a super-strong El Niño weather event drove soybean oil, palm oil, and rapeseed oil futures higher for three consecutive sessions. As long as the Middle East situation remains unresolved, prices are likely to stay volatile, with basis staying strong against near-term contracts and weak with forward contracts.

Nevertheless, the prices will return to the fundamentals once the support from strong crude fades.

On the supply side, the core logic behind ample global soybean oil supply is the abundant availability of soybeans as raw material, with major producing countries further consolidating this surplus.

In South America, the world's key soybean-producing region, the USDA has raised its forecast for 2025/26 Brazil soybean production to a record 180 million tonnes. Harvesting is nearly complete, and April exports are robust, with an estimated 15.78 million tonnes being shipped globally, providing strong raw material support for soybean oil crushing. This is expected to boost Brazil's soybean oil production by 700,000 tonnes year-on-year to 12.54 million tonnes, with production capacity continuing to be unleashed.

For US soybeans, 2026/27 planted area is projected to increase to 84.7 million acres, up 4.3% year-on-year but below market expectations of 85.55 million acres. Assuming normal weather later in the season, production is estimated to reach 4.45 billion bushels, a significant year-on-year increase. Old-crop soybean exports and crushing have remained stable, with ample inventories.

CBOT soybean and soybean oil prices have continued to trend lower, adding pressure on domestic soybean oil prices from the cost side. U.S. soybean oil production is expected to rise 510,000 tonnes year-on-year to 13.76 million tonnes, while inventories edge up to 840,000 tonnes, modestly increasing supply pressure. Meanwhile, exports will likely fall sharply by 590,000 tonnes year-on-year, reflecting weak overseas demand that further reinforces the ample supply picture.

On the demand side, global soybean oil consumption sees biodiesel policy serve as the key variable, with export demand slightly softening.

The ongoing implementation of the U.S. RVO policy and Brazil's B15 blending mandate has driven significant growth in their domestic soybean oil consumption in both countries. U.S. domestic soybean oil consumption is projected to grow 1.11 million tonnes year-on-year to 13.31 million tonnes, while Brazil's climb 640,000 tonnes to 11.05 million tonnes.

Biodiesel has thus become a critical demand driver. However, the recent pullback in international crude oil prices has weakened soybean oil's energy attribute, making the support from biodiesel uneven and difficult to sustain.

In addition, palm oil's cost competitiveness is diverting demand away from soybean oil.

Malaysian palm oil has entered its seasonal production increase phase. Over April 1-15, the output per hectare rose 26.16% month-on-month, and total production jumped 27.42% month-on-month. Yet exports have remained weak, with April 1-10 shipments down nearly 40% month-on-month, leading the fall in edible oil prices.

Meanwhile, Indonesian palm oil supply is gradually recovering. Lower palm oil prices are driving some food service and food processing demand to shift from soybean oil to palm oil, further limiting incremental demand for soybean oil.

Overall, in USDA monthly report released in April, 2025/26 global soybean oil exports are estimated at 13.90 million tonnes, down 1.31 million tonnes year-on-year, signaling significantly weaker exporting demand.

In China, the core support for domestic soybean oil supply comes from soybean imports and crusher operations. Although some crushers are currently idled due to soybean shortages, the expected surge in soybean arrivals over the next three months will lift crusher operating rates, boosting soybean oil production and significantly strengthening domestic supply capacity.

As of April 17, 2026, China's commercial soybean oil inventories stood at 1.01 million tonnes, up 13,600 tonnes (1.37%) from the previous week and 263,200 tonnes (35.35%) year-on-year. Current inventory levels are far higher than a year ago, creating sustained downward pressure on prices.

Notably, 2025/26 soybean oil exports are projected to reach 500,000 tonnes, a sharp 56% year-on-year increase, indicating that domestic soybean oil prices are internationally competitive and the export window remains open.

At present, high domestic soybean oil inventories coexist with weak demand. Crushers' forward-month pre-sales are progressing slowly, and trader activity remains subdued. Given the volatile situation in the Middle East, edible oil prices are likely to be prone to upward moves but difficult to fall sharply in the short term.

In the medium term, focus should be on U.S. weather, domestic demand recovery, export sustainability, and other core variables, awaiting signals of a supply-demand pivot.