BOPO at +260 as RFS Premium Collides with Global Surplus and Thin ARAG Liquidity

The most striking feature in the complex remains BOPO above plus 260. At the end of 2024 the spread traded near minus 200. The reversal has occurred despite more comfortable US soy oil stocks and looser global oilseed balances. This is not a classical shortage driven rally. It is a structural repricing.

Palm fundamentals are clearly expanding. Global palm oil production is projected to reach 80.7 million tonnes in 2025/26, up 3 percent year on year, with Indonesia at 46.7 million tonnes and Malaysia at 20.2 million tonnes. Ending stocks are expected to rise to 15.3 million tonnes. Exports are forecast at 45.6 million tonnes while global consumption reaches 77.7 million tonnes. Palm is rebuilding inventory.

Malaysian February 1 to 20 exports fell between 8.92 percent and 12.62 percent, with volumes between 779,834 and 863,358 tonnes. That softer export pace reinforces the surplus tone.

At the same time, FOB Paranaguá soybean oil premiums are deeply negative, in a range of minus 1,000 to minus 1,250 versus board equivalents, with pressure likely to expand. That pricing reflects global clearing levels. It signals that soyoil outside the US, supply is ample and origin sellers are aggressive.

Chicago soyoil futures, by contrast, measure RFS related pricing rather than global balance sheets. The board embeds compliance value and forward RVO expectations. That is why soy oil can trade at a significant premium to palm even when global supplies are comfortable. The market is valuing mandated demand and policy optionality.

Volatility adds another layer. Policy uncertainty, tariff shifts and geopolitical tension widen risk buffers. Traders price forward uncertainty into paper structures. The premium in Chicago is therefore both a mandate premium and a volatility premium.

In Europe, ARAG window liquidity was thin. No UCOME trades were reported. RME traded at 1,400 dollars per metric ton and FAME 0 at 1,347.50 dollars per metric ton. The RME to F0 differential remains moderate, suggesting no acute feedstock squeeze. The absence of UCOME trades stands out given its structural role in recent years.

Advanced fuels were firmer. HVO class II moved up 56 dollars per metric ton to 2,560 dollars per metric ton. SAF was assessed at 2,265 dollars per metric ton. The advanced segment continues to reflect structural demand and limited flexibility in high quality feedstocks.

Despite thin physical trading, week 8 bio paper volumes exceeded 1 million metric tons again. That follows several weeks near or above that threshold. Strong paper participation alongside light window activity is typical in volatile conditions. Participants hedge exposure aggressively even as prompt cargo liquidity contracts.

A further development to watch is the strong rumor that Brazil is considering an export tax on grains and oilseeds, similar to Argentina’s regime. If implemented, that would alter netbacks and could narrow deeply negative Paranaguá premiums quickly. It would materially change forward trade flow assumptions and potentially compress the current dislocation between US futures and origin pricing.

For now the structure is clear. Palm production and stocks are rising. Brazilian soy oil premiums reflect global surplus. Chicago soy oil reflects mandate economics and volatility. Europe trades selectively with advanced fuels firm. BOPO above plus 260 captures that imbalance in one number.