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Key takeaways:
The reduction of tariffs is part of a broader agreement between the countries, with the US also expected to reduce some of its reciprocal tariffs on India, which were implemented in 2025, from 50% to 18%.
Since the initial announcement on Friday February 6, however, details have been relatively scant apart from an interim framework, which states that “India will eliminate or reduce tariffs on all US industrial goods and a wide range of US food and agricultural products, including dried distillers’ grains (DDGs), red sorghum for animal feed, tree nuts, fresh and processed fruit, soybean oil, wine and spirits, and additional products.”
Currently, imports of crude vegetable oils are subject to a combined duty of 16.5%, which includes a 10% basic customs duty, a 5% agri cess and a 10% social welfare cess.
With full details on the trade deal still pending, market players have been speculating over the planned tariff adjustment, sources told Fastmarkets, with continuing talk that the reduction could be anywhere from 0-15%, and a ‘tariff rate quota’ (TRQ) volume of 200,000-250,000 tonnes.
A TRQ essentially limits the volume of US soybean oil that would enter India at the reduced tariff rate, with any volume above the quota subject to standard tariff rates.
“These [tariff adjustment percentages and TRQ volume] are all assumptions and speculations so far – once we have clarity on what the change in tariffs or quotas will be, only then can we make an impact assessment,” Sudhakar Desai, president of the Indian Vegetable Oil Producers Association (IVPA) and chief executive officer of Emami Agrotech, one of the largest soybean oil buyers in India, told Fastmarkets.
Aashish Acharya, vice president at Patanjali Foods, a leading edible oils importer, also told Fastmarkets, “[There’s talk going around,] but ultimately we need clarity over critical matters such as the actual quota, the quantum of the duty reduction, and if it will be done in stages, over time or reduced completely to zero in one measure.”
The lack of clarity has also limited discussions for soybean oil purchases over the last few days, with market players awaiting more details, although Indian government officials have stated that any reductions on US imports will only take place after the signing of the legal and formal agreement, which is expected to occur in mid-March.
“Without clarification from the government, India’s importers will not buy US soybean oil, and even after the agreement is finalized [likely in the second half of March], we will likely need another 40-50 days to complete the quota allocation process,” added Acharya.
Following the trade deal announcement, soybean oil futures on the Chicago Mercantile Exchange rallied to their highest in just over six months, fueled by optimism that the agreement would lead to increased US soybean oil exports.
However, trade sources have also told Fastmarkets that the US’ ability to export more soybean oil to India would depend largely on how much extra soybean oil the US will have for exports once the US Environmental Protection Agency (EPA) issues the finalized RVOs (Renewable Volume Obligations) for 2026 and 2027, which is expected sometime between now and the end of March.
Once that occurs, the US balance sheet for soybean oil is expected to adjust when the market receives clarity over the country’s biofuel policies.
India is the world’s largest edible oil importer, with the majority of its soybean oil coming from South American giants Argentina and Brazil and, to a smaller extent, Russia, while US soybean oil exports have typically found homes in neighbors Mexico and Canada.
US soybean oil exports are also seeing a dip in early 2026 compared with year-ago levels amid higher prices, due to expectations that demand from the US biofuel sector will ramp up in the coming months once US renewable fuel mandates and tax policy are finalized.
The last time significant volumes of soybean oil from the US entered India was in the first half of 2025, when around 188,000 tonnes of US soybean oil were imported into India over the span of February-May, according to data from industry group Solvent Extractors Association (SEA).
Those flows were largely a result of US soybean oil becoming the cheapest vegetable oil at the end of 2024 following uncertainty over the country’s energy policies and as palm oil, which has traditionally been the lowest-priced vegetable oil, was trading at a premium to its rival.
The situation is not the same coming into 2026, with palm oil currently offered at around $95-100 lower into India than soybean oil for March shipment.
Crude palm oil (CPO) into India was last assessed by Fastmarkets at $1,140 per tonne CFR west coast India, while soybean oil CFR India was assessed at $1,252 per tonne CFR.
“Palm oil is likely to remain the cheapest vegetable oil for the export trade, but we see Argentine soybean oil tracking towards palm oil while US soybean oil becomes an island due to the RVO,” said Alex Fox, an analyst from Stabro Corp.
Soybean oil FOB US Gulf was last assessed by Fastmarkets at $1,268.10 per tonne FOB, while soybean oil FOB Argentina Upriver ports was assessed at $1,178.25 per tonne FOB, while estimates for soybean oil freight for US-India and Argentina-India were around $90 per tonne and $72 per tonne respectively, sources told Fastmarkets.
This would imply US soybean oil as more expensive by around $108 per tonne or 8.6% higher on a landed India basis in current conditions, with any tariff reduction needing to be higher in order for US oil to be competitive into India.
Competition will be even stiffer going into April-July when South America’s harvest season takes place and soybean oil availability is expected to rise, with Patanjali’s Acharya holding the view that the US would remain uncompetitive, even if duties were reduced to 0%.
“US soybean oil will not be competitive against South American oil in the April-July months, even if you reduce the duty to 0%, with the South American harvest and higher freight and logistical costs out of the US,” he said.
Similar observations on the US’ ability to export more oil to India were also made by South American trade sources, although they acknowledged that there could be some effect on Argentine and Brazilian soybean oil exports.
“I would say yes [it will affect South American exports], but in the long term, I have doubts – does the US have significant quantities of soybean oil available for export?” a Brazilian-based broker said to Fastmarkets.
“With the advancement of renewable fuels and the stagnation of the US crop size, perhaps the effect won’t be so devastating,” they added.
Referring to speculation over the TRQ volume, he commented that the volume “seems like it will be negligible compared with the total import needs of India.”
His view was echoed by Patanjali’s Acharya, who noted that “if the volume is going to be around 250,000 tonnes, that is just 1% of India’s total annual edible oil consumption, so the impact may not be significant.”
An Argentina-based broker source also told Fastmarkets that the trade deal would likely have a limited effect on Argentine soybean oil exports and that increased flows to India from the US would be largely dependent on the US’ logistical capacity to export more and how local demand will react.
“We would need to have a clear understanding of the logistical capabilities of US Gulf and PNW ports and [of the] US’ domestic demand for soybean oil,” they said.
Another market source that deals with Argentine and Brazilian soybean oil said that, although in principle the news does not seem to be positive for South American soybean oil, especially in the case of Argentina, which has been the largest supplier of soybean oil to India, “this will depend on the volume that India authorizes to enter from the US and the US’ export capacity.”
“If India authorizes medium to large volumes, the potential impact would be a displacement of Argentine soybean oil by US oil, a drop in the FOB price of Argentine soybean oil, and a redirection towards other markets,” independent analyst Javier Preciado Patiño told Fastmarkets.
A quota of 200,000-300,000 tonnes, however, “will not be problematic” with Argentina’s price competitiveness, he added.
Patiño believes that, at least initially, India will opt for a small quota.
“While Argentina has proven to be a reliable and consistent supplier, India is aware of the ups and downs of the Trump administration’s policies regarding tariffs and foreign trade, so I don’t think they will want to grant them large quotas,” he said.
India has also “committed to buy more American products and purchase over $500 billion of US energy, information and communication technology, agricultural, coal, and other products,” according to a fact sheet on the White House website.
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