Canada Markets
Soybean Oil's Premium to Palm Oil May Be at Risk Due to El Nino
6/17/2026 | 10:04 AM CDT
By Mitch Miller, DTN Contributing Canadian Grains Analyst
Arguably one of the most important factors for vegetable oil markets to monitor going forward is the price spread between soybean oil and palm oil. With soybean oil used in biofuel production set to soar even further in 2026-27 (to 17.80 billion pounds, up from 14.55 billion in 2025-26 and a mere 11.758 billion pounds in 2024-25), there is no room for exports to amount to anything more than token levels. It is the job of the market to ensure that doesn't happen, with the recent soybean oil premium to palm oil of over $600/mt (USD) doing just that.
The developing story that needs to be on the radar is the potential impact of the current transition to El Nino, especially if it turns out to be as strong as currently predicted. The reason is the historic damage done to Malaysian palm oil production under such a scenario. According to a recent Reuters report, the country's economic minister has suggested that crop yields may fall 8-10% this year due to the phenomenon. The last severe El Nino conditions experienced in 2015 and 2016 cut palm oil output by up to 18% at the time, according to the minister. Such a similar outcome this year increases the risk that palm oil prices will jump in response, resulting in reduced exports.
If such a scenario does develop, the most important factor here will be how the soybean oil market responds. If it doesn't maintain the current price premium, it will encourage increased U.S. exports of soybean oil at a time when there is insufficient supply to allow for it.
We have already witnessed a hint of that on Tuesday when palm oil prices closed 2% higher while soybean oil eventually closed sharply lower on the day (thanks to relentless weakness in energy markets). In fact, over the past three weeks, soybean oil's premium to palm oil has dropped off over $110/mt. A trend that cannot continue.
A brief history lesson is warranted here. As you can see from the accompanying chart, soybean oil spent the better part of six months at a record price discount to palm oil rather than the normal premium. The results were significant. Soybean oil exports in 2024-25 (during the discount period) jumped to 2.492 billion pounds from 617 million pounds the previous year. In fact, USDA kept assuming soybean oil exports for the year would only reach 600 million pounds up until the December WASDE update when it finally acknowledged the impact of the discount to the palm oil price. A repeat cannot be allowed to happen again in the foreseeable future.
With the sharp increase in the premium for soybean oil since October, the export tap has been successfully shut off. In the June WASDE update released last week, USDA lowered the 2025-26 soybean oil export estimate by 150 million pounds to 1.050 billion pounds (that were due to sales made previously when the premium dipped to near zero last fall). That is still a marked decline from 2.492 billion pounds shipped last year.
For 2026-27, USDA is currently assuming exports will fall to a mere 400 million pounds but that may be tough to accomplish. It's not impossible, considering 2022-23 exports ended up at 378 million pounds with a similar premium to palm oil (as seen on the accompanying chart).
The key again will be the soybean oil premium to palm oil being maintained, amid a super El Nino cycle. Something to keep a close eye on.
I welcome feedback along with any suggestions for future blogs. My daily comments can be found in Plains, Prairies Opening Comments and Plains, Prairies Quick Takes on DTN products.
Mitch Miller can be reached at [email]mitchmiller.dtn@gmail.com[/email]
Follow him on social platform X @mgreymiller
(c) Copyright 2026 DTN, LLC. All rights reserved.
For the following chart...
With the amount of soybean oil used in the production of biofuel expected to increase by a further 3.250 billion pounds in 2026-27 after rising 2.792 billion pounds in 2025-26 from 2024-25 levels, exports will have to virtually be eliminated (other than token amounts). It will be the market's job to ensure the relative price is strong enough to accomplish that. As you can see by this chart, the premium to palm oil should be doing just that, so far anyway. (DTN ProphetX chart)
Soybean Oil's Premium to Palm Oil May Be at Risk Due to El Nino
6/17/2026 | 10:04 AM CDT
By Mitch Miller, DTN Contributing Canadian Grains Analyst
Arguably one of the most important factors for vegetable oil markets to monitor going forward is the price spread between soybean oil and palm oil. With soybean oil used in biofuel production set to soar even further in 2026-27 (to 17.80 billion pounds, up from 14.55 billion in 2025-26 and a mere 11.758 billion pounds in 2024-25), there is no room for exports to amount to anything more than token levels. It is the job of the market to ensure that doesn't happen, with the recent soybean oil premium to palm oil of over $600/mt (USD) doing just that.
The developing story that needs to be on the radar is the potential impact of the current transition to El Nino, especially if it turns out to be as strong as currently predicted. The reason is the historic damage done to Malaysian palm oil production under such a scenario. According to a recent Reuters report, the country's economic minister has suggested that crop yields may fall 8-10% this year due to the phenomenon. The last severe El Nino conditions experienced in 2015 and 2016 cut palm oil output by up to 18% at the time, according to the minister. Such a similar outcome this year increases the risk that palm oil prices will jump in response, resulting in reduced exports.
If such a scenario does develop, the most important factor here will be how the soybean oil market responds. If it doesn't maintain the current price premium, it will encourage increased U.S. exports of soybean oil at a time when there is insufficient supply to allow for it.
We have already witnessed a hint of that on Tuesday when palm oil prices closed 2% higher while soybean oil eventually closed sharply lower on the day (thanks to relentless weakness in energy markets). In fact, over the past three weeks, soybean oil's premium to palm oil has dropped off over $110/mt. A trend that cannot continue.
A brief history lesson is warranted here. As you can see from the accompanying chart, soybean oil spent the better part of six months at a record price discount to palm oil rather than the normal premium. The results were significant. Soybean oil exports in 2024-25 (during the discount period) jumped to 2.492 billion pounds from 617 million pounds the previous year. In fact, USDA kept assuming soybean oil exports for the year would only reach 600 million pounds up until the December WASDE update when it finally acknowledged the impact of the discount to the palm oil price. A repeat cannot be allowed to happen again in the foreseeable future.
With the sharp increase in the premium for soybean oil since October, the export tap has been successfully shut off. In the June WASDE update released last week, USDA lowered the 2025-26 soybean oil export estimate by 150 million pounds to 1.050 billion pounds (that were due to sales made previously when the premium dipped to near zero last fall). That is still a marked decline from 2.492 billion pounds shipped last year.
For 2026-27, USDA is currently assuming exports will fall to a mere 400 million pounds but that may be tough to accomplish. It's not impossible, considering 2022-23 exports ended up at 378 million pounds with a similar premium to palm oil (as seen on the accompanying chart).
The key again will be the soybean oil premium to palm oil being maintained, amid a super El Nino cycle. Something to keep a close eye on.
I welcome feedback along with any suggestions for future blogs. My daily comments can be found in Plains, Prairies Opening Comments and Plains, Prairies Quick Takes on DTN products.
Mitch Miller can be reached at [email]mitchmiller.dtn@gmail.com[/email]
Follow him on social platform X @mgreymiller
(c) Copyright 2026 DTN, LLC. All rights reserved.
For the following chart...
With the amount of soybean oil used in the production of biofuel expected to increase by a further 3.250 billion pounds in 2026-27 after rising 2.792 billion pounds in 2025-26 from 2024-25 levels, exports will have to virtually be eliminated (other than token amounts). It will be the market's job to ensure the relative price is strong enough to accomplish that. As you can see by this chart, the premium to palm oil should be doing just that, so far anyway. (DTN ProphetX chart)