China’s act on US soybean may pressure crude palm oil’s competitiveness — RHB Research

China’s decision to halt purchases of US soybeans for the current season is expected to depress soybean oil prices, thereby eroding the price competitiveness of crude palm oil (CPO), according to RHB Research.

The research house, in a note on Wednesday, cited data from Oil World forecasting a multi-year high in the end-August 2026 stock/usage ratio for soybeans, reaching 12%.

Furthermore, the global soybean stock/usage ratio is expected to remain at an extremely high level of 29.5% in 2026, indicating a sustained period of ample supply that will weigh on vegetable oil markets.

“We have already seen the CPO-SBO (soybean oil) price discount narrow by 55% over the last three weeks, to US$42 (RM177.39) per tonne (from a high of US$263 per tonne in June 2025),” said RHB.

Should soybean oil prices reduce further, this could result in demand for palm oil being destroyed, it said.

“We saw this happening in the early months of 2025, when India switched its buying to SBO instead of CPO, resulting in year-to-date August 2025 imports of palm oil from India falling 18% year-on-year. Assuming the price discount remains narrow, we would likely see palm oil imports remaining relatively muted going forward.”

RHB kept its neutral stance on the sector but raised its CPO price assumptions to RM4,350 per tonne for 2025 (from RM4,100 per tonne) and to RM4,250 per tonne (from RM4,000 per tonne) for 2026.

Domestic plantation stocks led the top gainers in early trade. In the first half hour of trading, United Plantations Bhd (KL:UTDPLT) was up 0.68% at RM23.60, Sarawak Plantation Bhd (KL:SWKPLNT) was up 3.16% at RM2.94, PPB Group Bhd (KL:PPB) was up 0.54% at RM11.12, and SD Guthrie Bhd (KL:SDG) was up 0.96% at RM5.27.

Despite fresh tension between the world’s two largest economies, US President Donald Trump said he might halt cooking oil trade with China.

He is retaliating against what he termed an “Economically Hostile Act” of Beijing, refusing to buy American soybeans and purposefully “causing difficulty for our soybean farmers”.

“We are considering terminating business with China having to do with Cooking Oil, and other elements of Trade, as retribution. As an example, we can easily produce Cooking Oil ourselves, we don’t need to purchase it from China,” said Trump on his Truth Social platform on Tuesday evening.

RHB said the primary driver for CPO prices continues to be Indonesia’s planned B50 biodiesel mandate, which its agriculture minister recently reaffirmed for a 2026 implementation.

This policy, the research house noted, would require a 5.3-million-tonne reduction in palm oil exports, though the minister suggested it could be a flexible tool, scaling back to B40 if global CPO prices rise too high.

However, significant doubts persist due to unresolved technical issues, including the precise fuel composition and a looming shortage of biodiesel production capacity, it added.

RHB’s initial analysis had concluded that B50 was unlikely for 2026 due to these hurdles and the intensified food-versus-fuel debate.

Nevertheless, in light of the recent official statements, the research house is now adjusting its forecast to assume a B50 rollout will commence from July 2026, pending successful completion of ongoing trials.

This revised outlook leads it to factor an additional 2.65 million tonnes of demand into its 2026 forecasts.

Indonesia’s energy minister stated on Tuesday that the government may regulate crude palm oil exports to secure sufficient domestic supply for biodiesel production.

As the world’s top palm oil producer, Indonesia’s plan to increase its biodiesel blending mandate from B40 to B50 in late 2026 has raised concerns about tightening global edible oil supplies, since more palm oil would be retained domestically rather than exported.