China Tariffs Keep U.S. Beans Out of the Game as Palm Oil Rally Crashes BOPO

The headline trade story today is the U.S.–China tariff extension. While both sides agreed to keep 24% duties suspended for another 90 days, the 10% tariff on U.S. soybeans remains firmly in place. That’s enough to keep American beans uncompetitive in China, especially against Brazilian supply, which is moving at a strong seasonal export pace. With U.S. farmers staring at a bumper crop and limited access to their largest historical export market, concerns are rising over prices and storage capacity heading into harvest. Old crop U.S. beans have found some takers elsewhere, but new crop business into China is minimal, leaving exporters facing a challenging demand outlook.

U.S. biofuel markets saw further weakness, with D4 RINs slipping to 1.165 and biodiesel crush margins dropping to around negative 44 cents per gallon. Soybean oil futures softened, but the more dramatic move came in BOPO, which plunged 8.5% on the day and is now down a third over the past three months. At current levels, BOPO is getting closer to the equilibrium quality differential of $100/mt — a point at which soybean oil becomes more competitive globally against palm oil. However, since the U.S. soybean oil market is largely guided by 45Z incentives, this narrowing BOPO has more impact internationally. It could encourage increased flows of soybean oil from China into India, which already imported over 180kt from China in July, with palm prices surging and substitution economics improving.

BOPO

The pressure on BOPO came from a strong palm oil rally despite a 4% rise in Malaysian stocks to 2.1 million tonnes in July. Market focus instead turned to exports, which climbed 3.8% month-on-month to 1.3 million tonnes, and a stronger early August shipment pace, helping drive CPO to a four-month high. Additional support came from Indonesia reaffirming plans to move to a B50 biodiesel blending mandate in 2026, up from B40, which would divert more palm oil to domestic fuel use and tighten export availability.

European physical biodiesel trading in ARAG saw UCOME barges change hands at +$689/mt for September (+$207 over ICE gasoil), FAME 0 at +$684.67/mt (+$202), and RME at +$795/mt (+$313), with spreads softening. On the paper side, activity remained light, but indicative values reflected weaker sentiment — UCOME September traded down to +$689/mt, with the premium over gasoil narrowing, while RME lost over $4 to +$1,454/mt. The physical barge market’s tone mirrored the broader weakness in vegoil feedstocks, despite palm’s strength.

In Europe’s distillates complex, gasoil dynamics have shifted sharply. August ICE gasoil expired at $670.50/mt — a massive $104/mt below July’s expiry, underscoring the magnitude of the flat price drop despite the steep backwardation seen last month. The Sep/Dec ICE gasoil spread has now eased to +$21, less than half of the +$44 seen just a month ago, reflecting a cooler prompt market and softer outright values.

ICE GASOIL Sep/Dec 2025

With palm oil setting the tone in vegoils, bean oil’s global competitiveness is improving, even if U.S. domestic trade flows remain driven by policy. Internationally, the narrowing BOPO could reshape trade patterns, with July’s 180,000+ tonnes of Chinese soybean oil exports to India potentially serving as a springboard for even larger flows ahead. Traders are watching to see whether tomorrow’s WASDE offers any relief, but for now, the tariff overhang keeps sentiment muted.