Is Soybean Oil Getting Ready For a Major Move? - Walsh Pure Hedge Division

Soybean oil traded lower this week due to uncertainty surrounding biofuel-blending quotas. It was the worst week for soybean oil since October. Earlier in 2025, the EPA proposed increased targets for biofuel and biomass-based diesel, in addition to further restrictions on the use of imported biofuels. It was reported today that the White House is not expected to finalize 2026 biofuel-blending quotas before the end of the year. The proposal calls for an increase from 5.36 billion RINs in 2025 to 7.12 billion in 2026, and 7.50 billion in 2027. Palm oil stocks are getting tight. Indonesia’s government seized land in palm oil producing regions and placed it under state-owned control. Indonesia also raised its biodiesel blending mandate to 40%; what this means is supply is getting cut off as demand is ramping up. Indonesia produces more than half of the world’s palm oil.

At the same time, sunflower oil stocks are already tight. Production estimates are lower in the EU and in the Black Sea, which should limit sunflower oil crushing and making the less expensive soybean oil more attractive. As mentioned, the blending rate is set to increase in Indonesia. The blending rate is also set to increase in Brazil and Malaysia. All of this comes at a time when Argentina has sold most of their soybeans to China, which will significantly limit their crushing. Soybean meal has recently fallen from its high at 331 to just above 300, which is supportive for soybean oil. I like being long soybean oil futures spreads and options spreads over the long term, looking for a move to 64.00 -66.00 cents. 

July ’26 SOYBEAN OIL

BUY 1 JULY ’26 54 CALL 2.560

SELL 1 JULY ’26 59 CALL 1.310

SELL 1 JULY’26 50 PUT 2.840

BUY 1 JULY 45 PUT 1.050

Price: 0.54 CREDIT        Cost: $324 CREDIT/TRADE PACKAGE, PLUS FEES AND COMMISSIONS.

JULY’26 SOYBEAN OIL OPTIONS EXPIRE 6/26/26 (196 DAYS) 

MAXIMUM LOSS: LIMITED

This is a longer-term trade, looking for soybean oil to trade 64.00-66.00. By entering this trade, you collect a credit of 0.54 or $324, in addition to any gains from a rally in soybean oil. 

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Hans Schmit
Broker, Pure Hedge Division 
312-765-7311
hschmit@walshtrading.com

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