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The South American soybean oil market has been anything but dull in 2026. With most of the first half of the year now behind us, making sense of the key developments that shaped market dynamics so far and looking ahead for what near-term prospects might look like demands a comprehensive analysis of how policy decisions in different geographies, geopolitical tensions and trade disruptions assumed center stage.
As Brazil and Argentina are set to harvest another record soybean crop this season, with USDA estimates currently pegging both countries’ combined output at 228 million tonnes, Brazil exported larger soybean oil volumes year-on-year since January and South American cash export premiums plummeted to historical lows.
Larger Brazilian exports and plummeting premiums, however, can only be fully understood if we take a step back to shed light on biofuel policy developments in both Brazil and the US.
When considering the South American soybean oil market, two sets of biofuel policy developments were essential for defining market dynamics in 2026 so far: the postponement of the increase in Brazil’s biodiesel mandates from 15% (B15) to 16% (B16) of the diesel mixture; and the US Environmental Protection Agency (EPA)’s announcement of the country’s revamped renewable fuels policies, particularly the new and large Renewable Volumes Obligations (RVOs).
In October 2024, the Brazilian government approved the Fuels of the Future law setting long-term targets and a roadmap to increase the country’s use of biofuels. The law includes a provision that allows the government to increase the domestic biodiesel mandate by one percentage point per year until reaching B20 in 2030. Mandate increases, however, are defined by the National Council for Energy Policies (CNPE) and are dependent on technical studies as well as on socioeconomic and political considerations.
According to the Fuels of the Future law, the transition from B15 to B16 should have been implemented on March 1, 2026, but was postponed with several CNPE meetings also being postponed or canceled over the past weeks and months. The law states that the CNPE is responsible for setting the mandatory blending rate within the limits of 13% and 25% but any blending rates higher than 15% need to have their technical feasibility previously verified. Government officials have consistently mentioned the completion of tests as a condition for the blending to increase.
The postponement had a major impact on Brazil’s biodiesel sector, which had already been struggling since the end of 2025 with compressed margins due to low negotiated fees1 and lackluster demand from fuel distributors.
The grim prospects for biodiesel producers, the postponement of B16 – which would add over 400,000 tonnes of soybean oil demand to the domestic market on an annual basis – and the expectations of a massive soybean crop exerted a strong downward pressure on Brazil’s domestic soybean oil prices.
At the same time, and despite the decline in soybean oil prices, Brazil’s soybean crush margins have been extremely healthy since the end of 2025, incentivizing crushers to continue supplying the market with large soybean oil and meal volumes. The same can be said about Argentina and the US, with the latter now having its highest crush margins since Fastmarkets started tracking it back in 2018, just matched by a very short period in mid-2022.
Against the backdrop of that outlook, large crushers and verticalized producers pivoted their attention to the export market. As a result, Brazil exported 725,414 tonnes of soybean oil between January and April this year, the second-largest volume on record for the period. The accumulated volumes shipped in the first four months of the year are just behind the 867,832 tonnes exported during the same period in 2023 when the country had a much smaller biodiesel mandate (starting the year at B10 and raised to B12 in April) and when it filled in the gap left in the export market by a massive soybean crop loss in Argentina.
After the US and Israel started the war in Iran, fossil fuel prices soared with biodiesel becoming more competitive than imported diesel in Brazil. This underpinned a short-lived uptick in domestic soybean oil prices between March and April as fuel distributors ramped up their biodiesel orders and biodiesel producers rushed to the spot market to secure soybean oil volumes.
From the second week of April, however, soybean oil prices lost momentum again under downward pressure from the country’s bumper soybean harvest and another round of low biodiesel fee negotiations valid for the months of May and June.
But the US-Israel war on Iran had yet another impact on Brazil’s biofuel and feedstocks sector by bringing the B16 discussion back to the forefront of the political discussion after President Luiz Inácio Lula da Silva said on April 30 the government would push forward the mandate increase.
It is still unclear when B16 will be implemented as technical viability tests are scheduled to start in May but once implemented higher mandates will help boost the domestic demand for biofuel feedstocks, particularly soybean oil.
Brazilian policies have been central in defining market dynamics in the country, but US biofuel policies are having an arguably even larger impact on the South American soybean oil market this year.
After months of speculation-driven market volatility, the EPA announced on March 27 the “set 2” Renewable Fuel Standards (RFS) for 2026 and 2027, with the highest RVOs on history that landed on the high-end of pre-announcement market expectations.
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Market impacts cannot be overstated. Soybean oil futures in the Chicago Mercantile Exchange, gained 50% in value since the start of the year, largely due to expectations around the new RFS. As a direct consequence, the implied board oil share – the share of the crush proceeds linked to the value of soybean oil – rose from 45% in the beginning of the year to 53% as of May 19.
Calendar spreads also skyrocketed to one of the highest levels seen in history, with the July-December spread hovering at around five cents per lb, an inverse structure that can hardly be explained only by the upcoming US soybean crop that will be harvested from September. This points to more potential volatility ahead, especially if the July futures contract faces a sharp downward correction to align with prices at the farther end of the curve ahead of the contract’s expiration.
But maybe more striking is the effect the policy announcement had on biofuel feedstocks cash markets.
US biofuel feedstocks prices soared backed by the prospects of higher renewable fuel output. This opened a large arbitrage opportunity for bringing in foreign feedstock, including Brazilian tallow that started flowing again to the US after the country’s Supreme Court ruled out Donald Trump’s International Emergency Economic Powers Act (IEEPA) tariffs on February 20, which had virtually erased that trade flow since the end of 2025.
At the same time, the steep surge in CME soybean oil futures was not mirrored by a similar upswing in South American cash prices. While South America does not benefit directly by the bolstered demand from US’s biofuels sector, the region also faced a softer demand from India, the main soybean oil export destination, since the beginning of the year. This effectively opened one of the largest spreads on history between South American export bases and their underlying CME benchmark.
Since Fastmarkets started tracking South American soybean oil premiums in 2018, the only time the market operated under such large discounts to CME futures was in mid-2023. At these discounts, the correlation to underlying futures effectively breaks and hedging strategies heavily reliant on CME futures become dysfunctional.
And the spread between Brazil and Argentina’s and US cash markets is even more striking as domestic US prices are currently at a premium to CME futures. At these levels, there is already an arbitrage opportunity to bring Argentine soybean oil into the US, even considering the current 19.1% import tariffs and even if the product were to be used to produce biofuels without a possibility to claim for 45z tax credits. Since the turn of the century, there were only two years when Argentina exported relevant amounts of soybean oil into the US, with 47,264 tonnes shipped in 2004 and 43,500 tonnes in 2024.
Looking ahead, several factors will likely continue to drive market directions.
From a supply perspective, if healthy crush margins persist, soybean oil and meal availability should remain plentiful in the US, Brazil and Argentina.
Due to its buoyant biofuels and feedstocks markets, the US is not expected to play a relevant role in the export market for feedstocks this year. The pace of South American exports, meanwhile, will largely depend on India’s buying appetite, on the region’s export competitiveness against rival oils, particularly palm, and, for Brazil, on the strength of the domestic market.
Brazil’s domestic demand for soybean oil will, by its turn, depend on the timetable for ramping up domestic biodiesel mandates. An earlier shift to B16 could support domestic prices and effectively keep more soybean oil volumes domestically. Brazilian soybean oil prices might also find some support in a lower domestic availability of tallow if export flows to the US continue to gather momentum. Tallow represents around 5% of the Brazilian biodiesel feedstocks mix and more volumes heading to the export market could mean an even larger soybean oil share in the feedstocks’ mix – currently at 76% according to Brazil’s National Agency of Petroleum, Natural Gas and Biofuels (ANP).
On the other hand, without additional demand from the biodiesel sector, Brazil could continue to ship larger-than-anticipated soybean oil volumes abroad and this could be a key factor to offset the lack of additional demand from the biodiesel sector.
Between January and April, Brazil gained soybean oil export market share, partly due to harvest delays and logistical disruptions caused by excessive rains in Argentina. Brazil shipped 725,405 tonnes of soybean oil abroad in the period, 232,309 tonnes more than in the previous year while Argentina exported 1.82 million tonnes, 237,177 tonnes less year-on-year.
India is the world’s main edible oils importer, responsible for around a third of global soybean oil imports. Currently, imported vegetable oils prices are not particularly competitive against domestic products, with the country having reported imports of one million tonne of soybean oil in the first quarter of 2026, down from 1.27 million tonnes in the previous year. This outlook, however, could change relatively quickly, especially as we head now into Argentina’s main export window.
Palm oil prices will also play a key role in defining India’s appetite for South American soybean oil through the coming months – remembering that Indonesia and Malaysia are ramping up their own palm-based biofuel mandates, which could affect palm oil export availability from the two main global producers and that Indonesia recently announced a state body to oversee palm oil exports, with market players awaiting clarity on what this will mean for export prices and flows.
This balance of Indian demand will bear a strong influence not only on the pace of Argentine soybean oil exports but also on the level of soybean oil cash market bases in South America, with more Indian buying potentially capping the downside to local premiums. On the other hand, if current cash market spreads between South America and the US persist, the surfacing of unusual soybean oil trade flows between both regions could impact both South American premiums and US prices, including CME futures, as Argentine exports into the US could rebalance regional supply and demand balances somewhat.
The continuation or resolution of the US-Israel war on Iran is another wildcard that will play a key role through the months ahead as fossil fuel prices have a direct impact on biofuel prices, margins and demand across the globe, with ripple effects across feedstocks markets.
Looking a bit farther ahead, unknowns seem more prevalent than knowns. 2026/27 global soybean supplies are still dependent on weather conditions and models are calling for a potentially very strong El Niño. At the same time, the war in the Persian Gulf disrupted global fertilizers markets and it remains to be seen when the conflict will be resolved and how much these developments will effectively impact on the use of fertilizers across North and South America.
And it is likely, to say the least, that global biofuel policies and trade disruptions, be it due to existing or new conflicts or to changes in tariff rules, will continue to impact markets.
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