Material Insights · Understanding the Material World

Palm oil and Soybeans

Palm oil and soybean oil are the two largest edible oils and close substitutes, so palm supply and prices feed into the value of every soybean crushed, and India switches its imports between them on price.

Palm oil (commodity) and Soybeans (commodity): 4 relationships.

How they are linked

1. Price link: substitute oil

Cost and price · Strong · Both ways

Palm oil is usually the cheapest vegetable oil and soybean oil its main rival in food and biofuel, so buyers switch between them and their prices move together, which carries through to soybean prices.

  • 0.43 monthly change correlation
  • 0.70 12-month change correlation
  • 0.67 fitted elasticity

The link is stronger over a year (0.70) than month to month (0.43) because weather in Southeast Asia and the Americas causes short-run gaps that buyer switching later closes. The bean price is also driven by meal demand, which dilutes the link compared with soybean oil itself.

Sources: Material Insights (World Bank, FRED, IMF data)

2. India switches between them

Substitution · Strong · Soybean oil replaces palm oil when palm is dear

Indian refiners and food makers can use either oil in most cooking and processed foods, so the price spread decides how much of each India imports.

  • 7.58 Mt India's palm oil imports, 2024/25, down from 9.02 Mt
  • 5.47 Mt India's soybean oil imports, 2024/25, a record
  • 56% to 43% palm's share of India's edible oil imports, marketing year 2023/24 against the first three months of 2024/25

Palm normally trades at a discount, but in early 2025 it traded at a premium to soybean oil, and India's soft oil imports rose from 6.95 Mt to 8.43 Mt in 2024/25 while palm fell. The Solvent Extractors' Association expected buyers to return to palm once it moved back to a discount.

Sources: Tridge (UkrAgroConsult); The Edge Malaysia (Reuters)

3. Oil value inside the soybean

Cost and price · Medium · Vegetable oil prices set part of soybean value

A bushel of soybeans crushes into about 11 lb of oil and 44 lb of meal, so when palm and other vegetable oil prices rise, the oil share of crush value rises and supports soybean prices.

  • 11 lb and 44 lb oil and meal from a bushel of soybeans
  • 25.8% to 52.7% range of soybean oil share of crush value, 2014 to 2022

The oil share peaked at 52.7% on 11 May 2022, weeks after Indonesia announced a palm oil export ban that took effect on 28 April 2022. Biofuel policy has also made soybean oil more valuable as a feedstock, strengthening the link between vegetable oil markets and the bean.

Sources: CME Group; Quartz

4. Same Indian import duty

Policy · High in India · India's duties apply to both crude oils alike

India sets one basic customs duty for crude palm and crude soybean oil and a higher one for their refined forms, so duty changes shift the overall import bill but leave the choice between the two crude oils to price.

  • 5% basic customs duty on crude palm and soybean oil from 24 September 2026, down from 10%
  • 27.5% basic customs duty on refined palm and soybean oil from September 2026, down from 32.5%

India cut the duty on these crude oils from 20% to 10% in May 2025 and to 5% in September 2026 to ease retail prices, keeping a wide gap to refined oil that favours domestic refining. Because crude palm and crude soybean oil carry the same duty, the spread between their world prices passes straight into Indian buying; crude sunflower oil, now duty free, gains a small edge over both.

Sources: All India Radio News; Business Today

For investors

Key learnings

  1. Palm and soybean oil are close substitutes, with a 12-month correlation of 0.70 between palm oil and soybeans, so palm supply news moves soybean values.
  2. India is a swing buyer: in 2024/25 it cut palm imports to 7.58 Mt and bought a record 5.47 Mt of soybean oil when palm lost its discount.
  3. Vegetable oil prices matter for the bean through the oil share of crush value, which ranged from 25.8% to 52.7% between 2014 and 2022.

What to track

  • Palm oil to soybean oil price spread: A palm premium shifts Indian and other buying to soybean oil (Daily · Bursa Malaysia, CBOT)
  • India's monthly edible oil imports by oil: Shows switching between palm and soft oils (Monthly · Solvent Extractors' Association)
  • Soybean oil share of crush value: Rising share signals vegetable oil strength supporting soybean prices (Daily · CME oilshare)

For policymakers

Key learnings

  1. Equal duties on crude palm and soybean oil let Indian buyers switch freely, so domestic prices follow the cheaper world oil.
  2. Export curbs by producers, such as Indonesia's April 2022 ban, spread across all vegetable oils, so diversifying sources alone does not insulate India.
  3. The duty gap between crude and refined palm and soybean oil, 5% against 27.5% from September 2026, protects domestic refiners while lowering consumer costs.

What to track

  • Indian edible oil import duties: Changes shift the import bill and the crude to refined mix (As notified · CBIC, Finance Ministry)
  • Domestic edible oil retail prices: Show how world price moves and duty changes pass through (Daily · Department of Consumer Affairs price monitoring)

India

India imported about 16.3 Mt of vegetable oils in 2024/25, with Indonesia and Malaysia supplying crude palm oil and Argentina leading soybean oil at 2.89 Mt, so its switching between the two oils can move world prices.

Sources

  1. Price correlation, Material Insights, Material Insights (World Bank, FRED, IMF data)
  2. India summarizes its vegetable oil imports for the MY 2024/25, Tridge (UkrAgroConsult) (2025)
  3. India's annual palm oil imports to fall behind soft oils for first time, industry official says, The Edge Malaysia (Reuters) (2025)
  4. Centre reduces basic custom duty on crude palm oil, crude soyabean oil and crude sunflower oil to 10%, All India Radio News (2025)
  5. An introduction to soybean oilshare futures and options, CME Group (2025)
  6. The global supply of cooking oil is going to reel from a new export shock, Quartz (2022)
  7. Govt cuts customs duty on edible oil ahead of festive season, Business Today (2026)