Biofuel mandates and El Niño drive global vegetable oil prices higher
The global prices of vegetable oils have surged due to a combination of factors, including war, El Niño, and national biofuel mandates. The United Nations’ Food and Agriculture Organization’s (FAO) vegetable oil price index reached 198.6 points in September, an 18.3% increase over the same month in 2025. This rise follows a peak of 211.8 points in June 2022, triggered by Russia’s invasion of Ukraine.
Vegetable oils such as palm, soybean, and rapeseed are increasingly being used to produce biodiesel (FAME) through a process called transesterification. National biofuel mandates require oil marketing companies to blend specified percentages of biofuels into fossil fuels. Indonesia, for instance, has progressively increased its biodiesel blend mandate, reaching B50 in July 2026, which absorbs a significant portion of domestic palm oil production.
The impact of these mandates is compounded by El Niño, which is expected to peak during October-December and last through March-April next year. This weather phenomenon is likely to reduce palm oil production in Indonesia, the world’s largest producer, from 58.5 million tonnes in 2026 to 56.6 million tonnes in 2027. Higher domestic consumption for biodiesel will further reduce exports, potentially affecting importers like India.
Additionally, the ongoing war between Russia and Ukraine has disrupted sunflowerseed oil supplies, as logistical constraints hinder exports. Despite higher production levels, the conflict has made it difficult for producers and importers to conduct business. For India, El Niño could also lower domestic edible oil production, leading to increased imports.