Acronym-loving Wall Street traders this week sent shares of grain trading and processing giant Bunge Corp. soaring after President Donald Trump on Tuesday said his administration was considering “terminating business with China” when it comes to imports of cooking oil. That threw a spotlight on used cooking oil, or UCO, which is used as a feedstock for biofuels and as a competitor to soybean oil.
Trump’s ire was in response to China’s continued lack of U.S. soybean purchases and appeared to offer some support to soybean oil prices, with the December futures contract up 1.8% this week through Thursday’s close, while November soybeans were up 4 3/4 cents, or 0.4%, over the first four days of the week.
But it was Bunge that was off like a rocket, posting a week-to-date gain of 18% through Thursday’s close, with the move coming after Trump’s Tuesday announcement. Archer Daniels Midland also didn’t do too shabby, posting a 3.4% gain over the same stretch. It comes during a week that saw equities wobble in response to credit jitters surrounding regional banks, though major indexes remain on track for weekly gains as earnings season moves into full swing.
So what gives? China’s UCO exports to the U.S. have tanked after hitting a record high in 2024 at 1.27 million metric tons, according to USDA, accounting for around 43% of China’s total UCO exports. Since then, Beijing has eliminated an export tax rebate for UCO and the U.S. has dropped tax credits for foreign-sourced feedstocks and imposed tariffs.
“With fewer UCO imports, we expect stronger demand for domestically produced soybean oil as a feedstock for biodiesel. That said, the overall impact may be limited, since UCO imports from China have already declined over the past year due to less tax incentives and higher tariffs,” said Arun Sundaram, analyst at CFRA, in a note this week. China has been redirecting UCO exports to other regions like Europe, where tariffs are lower and demand for biofuels, particularly sustainable aviation fuel, is rising, he wrote.
Still, a ban would be seen as a net positive for companies such as ADM and Bunge because UCO imports have historically pressured domestic soybean crush margins, the analyst wrote.
It wasn’t just UCO that lifted Bunge shares. The rally also came after a revised full-year outlook from the company in the wake of its recently closed merger with Viterra. Bunge now sees full-year adjusted earnings per share between $7.30 and $7.60, below its previous guidance of about $7.75 but still better than the $6.99 Wall Street consensus, Sundaram noted.
Soybeans added another 7 cents as of 10:30 Friday morning after Trump appeared to take down the temperature in the U.S.-China trade battle, telling Fox News that proposed 100% tariffs on China probably weren’t sustainable. “I think we’re going to be fine with China, but we have to have a fair deal,” he said.