Soybeans Went Through $13 and Palm's Bear Case Quietly Fell Apart
Chicago soybeans topped $13 a bushel on 1 September for the first time since December 2023 after the US exemption package landed with a reallocation attached, and Chicago soyoil rallied more than 2%. Malaysian palm gained 2% the same session before easing 0.42% to 4,952 ringgit at Wednesday's midday break on profit-taking. Palm has now recovered almost all of its drop to the 28 August low of 4,799.
Ten days ago the market had four reasons to be short palm. Three of them have gone.
Working through the list
The biofuel bid. The bear case here was that a large US exemption package would gut the feedstock demand underpinning the whole complex. The package was large — the largest on the table, in fact — but the agency proposed reallocating the full difference between projected and actual exempted volumes into the 2026 and 2027 obligations. The market read the second half of that sentence rather than the first, and it read it as more bullish than what it had already priced. Soybeans through $13 is what that repricing looks like.
Crude. In late August, oil was falling on expectations that talks might reopen the Strait of Hormuz, and every dollar off the barrel widened palm's disadvantage as a discretionary biodiesel feedstock. Those hopes have gone. US and Iranian forces exchanged strikes around the Strait, oil rose more than 2%, and the barrel is back near $90. Stronger crude restores the energy floor under palm that had been removed.
Indian demand. The August data landed this week: 1.54 million tonnes of edible oil imported, an eleven-month high, with palm at a six-month peak of 780,000 tonnes and soyoil at a record 601,000 tonnes. The world's largest buyer was not absent during the sell-off. It was buying heavily.
Exports — the one that has not reversed. Cargo surveyors put full-month Malaysian August shipments between 6.5% and 14.9% below July. That is better than the 11.4% to 20% the same surveyors were showing at the 25 August mark, so the month finished stronger than it tracked. But it is still a decline, and demand into the palm sector specifically remains thin. India is now well covered and unlikely to chase at these ringgit levels.
The honest reading
Three reversals and one unresolved weakness is a market that has repaired its floor without rebuilding its ceiling.
The soyoil rally helps palm by pulling the whole complex up, but it does so in a way that makes palm relatively less attractive, not more. Palm lost competitiveness against soyoil through August, and a Chicago-led rally does not fix that on its own — it needs palm to lag on the way up, which is precisely what a market with soft exports tends to do.
The crude recovery is real but it is a war premium, and war premiums are the least durable kind. If the Hormuz situation de-escalates again, that floor comes straight back out.
And the reallocation, for all the enthusiasm, is a proposal rather than a rule. It is due to be published before the end of October. Between the promise and the publication there is a comment period, a likely legal challenge, and an open question about how much of the restored volume lands in the biomass-based diesel and advanced categories that actually pull on vegetable oil rather than in conventional ethanol credits.
Technically the market is pointing higher — a move into the 5,032 to 5,083 ringgit band is the flagged upside, and the recovery from 4,799 has been fast. The supply question that decides whether it gets there is August Malaysian production, with association data awaited. Hot, dry weather during the month is the variable; if output came in soft, the stock build that the bears were counting on does not materialise.
For Indian buyers
The window that opened in late August has narrowed considerably. Palm has recovered most of its decline in under a week, crude is back up, and the US policy shock that drove the sell-off has been substantially walked back.
Anyone who took near-dated cover into the weakness has been rewarded. Anyone still waiting for a better level on October and November should recognise that the case for one has weakened materially in five sessions. The remaining argument for patience is export weakness, and that is the thinnest of the four legs — it depends on Indian buying staying soft, which is a self-cancelling proposition if everyone waits.
The more durable point is one flagged here before: with two heavy import months banked and cumulative arrivals running ahead of last year, Indian buyers are not under pressure. Not being under pressure is worth more than calling the exact low.
Watch three things: Malaysian August output data, whether soyoil sustains its move now that the initial reallocation enthusiasm has been priced, and whether the Hormuz premium holds.
Forward-looking views here are analysis, not investment advice.
