Last week, China's domestic futures market observed the Spring Festival holiday. During this period, international markets, including CBOT soybeans, continued trading. Over the holiday days when the domestic market was closed, the main soybean contract on CBOT did not provide clear directional guidance, moving within a relatively narrow range. In contrast, CBOT soybean oil showed stronger performance, with a noticeable upward trend starting from last Friday. By February 23, the main contract had gained approximately 4%. Meanwhile, the main palm oil contract on the BMD Malaysia exchange rose significantly by 68% over the four trading days during the holiday period.
Internationally, macroeconomic dynamics saw crude oil prices surge over 2% in a single day last Thursday, reaching a six-month high. This increase was primarily driven by heightened military activities between the U.S. and Iran in key Middle Eastern oil-producing regions, raising market concerns over escalating tensions. The strength in crude oil prices has provided support to the edible oil sector through improved biodiesel profit margins and positive market sentiment. Attention is now turning to the anti-dumping ruling on Canadian rapeseed, which China's Ministry of Commerce is expected to announce on March 9. Although bilateral relations have improved, previous U.S. statements warning of potential tariffs if Canada cooperates closely with China remain a factor, introducing uncertainty that may influence post-holiday price movements in the rapeseed market.
Looking ahead, market focus in the CBOT will center on weather developments in South America, particularly Argentina, and U.S. biofuel policy updates. Recent days have seen very limited rainfall in central Brazil, where soybean harvesting is ongoing, potentially accelerating field operations. A weather forecast on February 20 indicated scattered showers in Rio Grande do Sul and Paraná from Friday through Monday. In Argentina, deep soil moisture levels remain relatively low for this time of year. While Brazil's bumper harvest appears certain, increased competition from South American supplies is expected to affect U.S. soybean exports. Additionally, the U.S. Environmental Protection Agency (EPA) is anticipated to submit its 2026 biofuel blending quota proposal to the White House this week, fueling optimism about rising demand for soybean oil. Any progress on this policy during the holiday could directly benefit U.S. soybean oil prices and, in turn, support domestic soybean oil markets.
In Malaysia, data from the Southern Palm Oil Millers Association (SPPOMA) indicated that palm oil production during February 1–10 fell by 58% compared to the previous period. Fresh fruit bunch (FFB) yields decreased by 9.16%, while the oil extraction rate (OER) increased by 0.3%. More recent data for February 1–20 showed a further expansion in the production decline, down 22.24% month-on-month, providing additional support to market sentiment at the opening. Market participants are closely monitoring upcoming data releases from the Malaysian Palm Oil Association (MPOA).
According to shipping surveyor SGS, Malaysia's palm oil exports during February 1–15 totaled 393,853 tons, unchanged from the 525,228 tons recorded in the first half of January. Data from ITS showed exports of 863,358 tons for February 1–20, down 8.9% from 947,939 tons in the same period a month earlier. Independent inspection company AmSpec reported exports of 779,834 tons for February 1–20, a decline of 12.6% compared to 892,428 tons in the prior month.
Domestically, total edible oil inventories before the Spring Festival were higher than the same period last year. Production facilities gradually resumed operations after the sixth day of the lunar new year. With holiday consumption and stockpiling for the back-to-school season, a wave of concentrated restocking is anticipated. Coupled with relatively low soybean imports in February and March, the first week after the holiday may see a drawdown in inventories. However, seasonal demand is expected to soften after March. As Brazil’s soybean harvest progresses and China resumes purchases of Canadian rapeseed, oil mill operating rates are likely to increase, which may lead to a stabilization followed by a potential decline in basis differentials.
Overall, the edible oil market presents a mixed outlook. On one hand, U.S. biodiesel policy continues to offer important long-term support, with expectations of a significant increase in blending mandates for 2026, providing a floor for oilseed prices. Market participants are closely watching for the finalization of the Renewable Volume Obligation (RVO). For the rapeseed market, improved China-Canada relations may ease previous supply tightness, though U.S.-Canada dynamics remain a variable influencing China's rapeseed imports. If no major disruptions occur, a pattern of near-term strength and longer-term weakness may emerge, with downward pressure on rapeseed prices remaining notable.
In palm oil, recent production data from Malaysia for January showed some decline, but the corresponding contraction in exports has been less pronounced. The pace of inventory reduction in producing regions requires further observation. If production declines continue to widen, support for edible oil prices may become more evident. Post-holiday, rising crude oil prices and optimism around potential biofuel policy developments have contributed to a stronger opening in domestic oilseed markets. However, given the mixed fundamental signals, sustained upward momentum will depend on the materialization of long-term demand support from U.S. biodiesel policy and clearer signs of tightening supply fundamentals in palm oil-producing regions.
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