Agri-commodity market tracker: Recovery in soybean oil price

By Jane Byrne

- Last updated on GMT

© GettyImages/JJ Gouin
© GettyImages/JJ Gouin

Related tags EPA Biofuel mandates soybean oil Soybean meal

Vegetable oil markets have staged a rebound, after the sell-down instilled largely by the recent announcement by US Environmental Protection Agency (EPA) on biofuel mandates.

The recovery has been witnessed chiefly in the soybean oil market, which was at the centre of the mandate speculation, given its predominance as the feedstuff for the US biodiesel industry, noted CRM Agri, in a review.

The mandate levels​ for advanced biodiesel, a big user of soybean oil in the country, provoked some disappointment, said the UK analysts, but not so much for this year’s figure, which at 5.94bn gallons was 120m gallons above the level originally proposed, but for those further ahead.

“For next year, the announced mandate of 6.54bn gallons was 80m gallons short of the initial proposal, with the 2025 figure of 7.33bn gallons showing a shortfall of 100m gallons. Still, that enshrines marked growth, of 23% over two years, in the advanced biodiesel mandate, and sets the scene for growth in domestic soybean oil consumption.”

The US Department of Agriculture (USDA) forecasts 5.7Mt of US soybean oil use in making biofuels in 2023/24, up by 20% since 2021/22.

“The soybean oil price recovery has supported prices of other vegetable oils too, although they have felt more of the gravitational pull from the crude oil market, weakened by worries over economic growth crimping demand when most producers seem unwilling to curtail output. Brent crude futures have retreated, falling back close to 18-month lows,” said the CRM Agri team.

Soybean, meal prices

The fading concerns over US Corn Belt drought enabled by a wetter turn in weather forecasts, has undermined soybean prices, said the grain and oilseed market specialists.

“The loss of upward market momentum chiefly reflects waning US crop worries, as rains have returned to the Corn Belt – northern parts, at least – and more is in the forecast. Current weather models predict rainfall of 1 inch (2.54cm) over the next week across the Midwest, including for the key Corn Belt states: Illinois, Indiana, and Iowa.”

That dynamic is reflected in the meal market, they said. Not only have soybean meal prices fallen back from last week’s high, but calendar spreads - the price gaps between spot and distant contracts - have recovered too, they reported.

South American market  

The soy market can rely, however, on a strong Brazilian crop - estimates for the newly harvested 2022/23 crop are coalescing around 156Mt mark, a record high and some 7-8Mt above levels that the market was pencilling in a year ago.

Export forecasts from in-country commentators are as high as 97Mt, well above the 93.0Mt that the USDA foresees, said the UK team.

“However, many of these exports will be heading south to crushers in Argentina, the top soymeal and soy oil exporter, after the failure of the country’s own harvest. This is now generally estimated at around 21Mt, compared with initial figures of about 50Mt. Indeed, Argentina has been the second-ranked destination for Brazilian soybean exports so far in 2023.”

Given dynamics like this, it may be little surprise that China, the top soybean importer, had been front-loading its purchasing program, continued the analysts. Imports rose by 11% year on year in the first five months of 2023, with June and July imports expected to show year-on-year growth too.

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