In January, the domestic edible oil sector overall exhibited a bullish trend, yet the strength divergence among different varieties was pronounced. During the first half of January, the market oscillated repeatedly as it tested levels amidst a tussle between exhausted bearish factors and a lack of additional positive catalysts. Entering the mid-to-late part of the month, bullish expectations resurfaced concerning US biofuel policy news. Concurrently, as Southeast Asian palm oil producing regions entered their seasonal production reduction phase, the previously insufficient decline in production data showed an expanded drop, while high-frequency export data indicated signs of improvement. Market expectations for reducing the high inventory levels at the origins surged dramatically. Coupled with a significant uptick in crude oil prices, this propelled palm oil prices to break out strongly, becoming the primary driver for the sector's rise. Soybean oil followed closely behind. Although the easing of China-Canada relations exerted some pressure on rapeseed oil supply, uncertainty was reintroduced last week with US-Canada relations, causing rapeseed oil to also follow the overall trend. As of January 30th, the monthly gain for the palm oil main contract was 7.64%; the soybean oil main contract rose approximately 5.34% for the month; and the rapeseed oil main contract closed the month up 3.22%.
International crude oil prices experienced a noticeable pullback, primarily influenced by expectations for a potential easing of the Russia-Ukraine conflict. Analyzing the current market situation, on the fundamental side, OPEC+ reaffirmed there would be no production increase in March, indicating the current loose supply situation will not worsen further. However, objectively, the expectation for gradually widening supply persists, thus supply continues to exert pressure on oil prices. Regarding financial attributes, the January FOMC meeting paused the rate-cut path, and the announcement of the next Chair nominee triggered market turbulence, with bets leaning towards more than two rate cuts within the year, potentially slightly alleviating macroeconomic pressures. Politically, while Russia and Ukraine recently engaged in talks, a complete ceasefire agreement has not yet been reached, and the potential for escalation in direct international tensions between Iran and the US remains, suggesting continued high volatility in the short term. The supportive impact crude oil provided to the vegetable oil sector last week has temporarily faded, leading to some risk premium retracement. If crude oil prices maintain high volatility this month, the edible oil sector may still be affected.
Based on high-level talks during the Canadian Prime Minister's visit to China in mid-January 2026, China-Canada relations have eased, culminating in a series of important consensus points. According to the agreement, effective March 1, 2026, China is expected to significantly reduce the import tariff on Canadian rapeseed from the current comprehensive rate of approximately 85% to about 15%, while also abolishing the anti-discrimination tariff on Canadian rapeseed meal. However, rapeseed oil did not experience a sharp decline during January's trading. On one hand, previous bearish factors had been continuously priced in, bringing prices to a relatively low range. Furthermore, due to the diversification of direct rapeseed oil import sources, the impact of previously tense China-Canada relations on rapeseed oil was less severe than on rapeseed meal. On the other hand, current crushing margins remain relatively limited, restricting the short-term downside space for rapeseed oil. Looking towards the Chinese New Year, as the policy has not yet been formally implemented and the arrival of new supplies takes time, this influence is still expected to manifest as anticipatory pressure rather than a major bearish factor for now. However, for the future market, close attention should be paid to subsequent import license issuance and the shipment schedule for rapeseed import purchases.
According to information from China Grain and Oils Business Network, the harvest progress for Brazil's 2025/26 soybean crop reached 6.6%, higher than 2.3% a week earlier, 3.2% in the same period last year, but slightly below the five-year average of 7.0%. Consultancy AgRural stated on Monday that it forecasts Brazil's 2025/26 soybean production at 181 million metric tons, an upward revision of approximately 600,000 tons from its December 22nd prediction of 180.4 million tons.
The Buenos Aires Grain Exchange (BAGE) reported that as of January 28th, sowing for Argentina's 2025/26 soybean crop was 99.5% complete, up from 96.2% the previous week. Currently, 83.8% of the soybean crop is rated in normal to good condition, slightly lower than the level reported in the previous period. Despite this, soil moisture conditions are rated as adequate to optimal across 64% of the planted area. Argentine soybeans are now entering a critical growth period, particularly in main producing regions, requiring more precipitation to secure yields. Approximately 16.4% of the second-crop soybeans have entered the flowering stage, but moisture conditions there are somewhat tight. BAGE predicts Argentina's 2025/26 soybean production at 48.5 million tons, lower than the previous year's 50.3 million tons. The latest forecast from the Rosario Grain Exchange (BCR) projects Argentina's 2025/26 soybean output at 47 million tons, unchanged from its earlier prediction and below the 49.5 million tons recorded in 2024/25.
The January 2026 report indicated substantial inventory accumulation, making it difficult to release the fundamental substantive pressure. However, with the expanded decline in January's high-frequency production data, market expectations for future inventory drawdown have strengthened, suggesting the peak inventory level in Malaysia may have already occurred.
The Malaysian Palm Oil Association (MPOA) reported that Malaysian palm oil production for January 1-20, 2026, decreased by 14.43% compared to the previous month. Production in Peninsular Malaysia fell by 14.29%, Sabah's output dropped by 11.12%, Sarawak's production declined by 23.21%, and production in East Malaysia overall decreased by 14.60%.
Data from the Southern Peninsular Palm Oil Millers' Association (SPPOMA) showed that for January 1-25, Malaysian palm oil production decreased by 14.81% month-on-month. The fresh fruit bunch (FFB) yield fell by 15.28%, while the oil extraction rate (OER) increased by 0.11%.
Recent sustained rebounds in palm oil prices have prompted some restocking activity in importing countries. However, export growth figures are not particularly significant, suggesting that the extent of inventory drawdown in Malaysia by the end of February might be relatively limited.
Shipment surveyor ITS released data showing Malaysian palm oil exports for January 1-25 at 1,163,634 tons, a 10.0% increase from the 1,058,112 tons exported during December 1-25. Exports to China were 29,800 tons, a decrease of 78,000 tons from the 107,800 tons recorded in the same period last month. Another surveyor, SGS, reported Malaysian palm oil exports for January 1-25 at 746,745 tons, a 9.4% decrease from the 824,276 tons shipped during December 1-25. Exports to China were 28,500 tons, down 54,500 tons from the 82,900 tons in the previous month's comparable period. Independent inspection agency AmSpec reported Malaysian palm oil exports for January 1-25 at 1,099,033 tons, an 8.0% increase from the 1,017,897 tons exported during December 1-25.
Monitoring data from China Grain and Oils Business Network indicates that as of the beginning of the 5th week of 2026, factory soybean oil inventories decreased to approximately 970,000 tons, down nearly 4% week-on-week but up over 10% year-on-year. The previous week's factory operating rate was around 58%, leading to increased soybean oil output. Last week, the operating rate rose to about 65%, further increasing soybean oil production. With factories focusing on shipments, soybean oil inventories are expected to continue declining.
Data from China Grain and Oils Business Network shows that imported rapeseed inventories stood at 120,000 tons at the end of the 4th week of 2026, unchanged from the previous week but down 420,000 tons compared to the same period last year. As of the end of the 4th week of 2026, domestic imported crushing rapeseed oil inventories were nearly 270,000 tons, a decrease of nearly 11% compared to the previous week. Rapeseed oil inventories are being drawn down slowly. Last week, COFCO's rapeseed production line resumed operation; it remains to be seen if this will replenish rapeseed oil inventories to some extent.
Monitoring data from the Grain and Oils Business Network shows that as of the end of the 4th week of 2026, total domestic palm oil inventories were 695,300 tons, an increase of 17,700 tons from the previous week's 677,600 tons. Contracted volumes were 37,800 tons, a decrease of 1,400 tons from the previous week's 39,200 tons.
The edible oil sector performed strongly in January, particularly breaking upward last week. Besides its own factors, the firm performance of crude oil prices, influenced by geopolitical tensions, also injected some premium into the sector. Returning to fundamentals, the oilseed and edible oil sector is currently in a period of concentrated policy developments, leading to significant volatility in futures prices. Firstly, bullish signals have re-emerged regarding US biodiesel policy. Current expectations point to a substantial increase in the US biofuel blending obligation for 2026, providing some underlying support for the overall oilseed and edible oil sector. Close attention is needed on the final data from the US RVO final rule expected in early March. Regarding the rapeseed complex, the China-Canada negotiation agreement has been reached. China will reduce rapeseed import tariffs and cancel anti-discrimination tariffs on Canadian rapeseed meal after March 1st, effectively breaking the previous tight supply situation for rapeseed raw materials in China. Although current crushing margins are relatively limited and the fundamental shift towards looser supply will take time, a pattern of nearby strength and distant weakness may gradually form, and the cap on the rapeseed complex should not be overlooked. For palm oil, the current inventory level in Malaysia, exceeding 3 million tons and at a multi-year high for the period, continues to exert significant fundamental pressure at the origin. However, there is a suspicion that bearish factors may be largely priced in. Combined with signals of marginal tightening in the latest Malaysian high-frequency January production and export data, the market holds considerable expectation for future inventory drawdown. From a阶段性 perspective, US biodiesel policy provides medium-to-long-term demand support for edible oils. Additionally, the marginally tightening fundamentals for palm oil serve as the two main sources of confidence for edible oil bulls. However, following substantial gains last month, these factors alone are暂时难以支撑其持续上行 and may struggle to support continued upward momentum in the absence of additional catalysts. Futures prices might暂时维持宽幅震荡, and breaking through previous high resistance levels appears challenging. Simultaneously, influenced by crude oil, edible oils may find it difficult to escape a pattern of high volatility. Furthermore, considering the upcoming Spring Festival holiday this month, the current operational strategy primarily involves profit-taking or exiting long positions, with light positions and short-term trades recommended to guard against the risk of significant price swings.
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