China. As the off-season approaches, soybean oil prices will fluctuate weakly

Since mid-November last year, soybean oil futures in Dalian have fluctuated and fallen due to weakening demand expectations for soybean oil. After the Spring Festival, when the country enters the off-season of oil consumption and there is a lack of positive news on the fundamentals of foreign oils and fats, soybean oil futures will still maintain a weak trend.

It is hard to find positive news for international soybeans

In the January Agricultural Supply and Demand Report, the USDA significantly lowered the U.S. soybean production and ending stocks data for 2024/2025. U.S. soybean and soybean oil futures rose sharply, halting the decline in Dalian soybean oil futures. However, with the large South American soybean crop entering the market, domestic soybean supply has increased. In addition, U.S. soybean oil production is relatively high, while biodiesel demand is expected to decline, U.S. soybean oil was unable to grow.

Due to heavy rainfall in the main production regions, soybean harvesting in Brazil was delayed, and there were even some production losses. Nevertheless, thanks to increased planted acreage, Brazil’s soybean production in 2024/2025 will still set a record. In addition, with the recent sunny weather, harvest progress has begun to accelerate. The huge production of Brazilian soybeans will soon be able to supply the international market, thereby displacing the export space of U.S. soybeans and having a decidedly negative impact on U.S. soybean futures. According to the weekly planting and harvest report released by the Brazilian National Commodity Supply Company (Conab), as of February 2, Brazil’s 2024/2025 soybean harvest rate stood at 8%, up 4.8 percentage points from the previous week. It is still behind the 14% level for the same period last year, but the gap has narrowed significantly. In addition, Brazilian consulting firm Celeres said that thanks to improved weather conditions, Brazil’s soybean production in 2024/2025 is expected to reach a record 174 million tons, up from the previous forecast of 170.8 million tons and 15 million tons more than the previous year. Another consulting firm, StoneX, said Brazil’s soybean production in 2024/2025 is expected to reach 170.89 million tons, down from the previous forecast of 171.4 million tons, but still well above last year’s production and the highest level ever.

The USDA’s forecast for US soybean supplies was clearly optimistic, and combined with the Biden administration’s restrictions on imports of used vegetable oil, this led to a daily cap on US soybean oil futures. However, with Trump in office, the use of soybean oil for biodiesel production will be limited, and with a record US soybean crop in 2024/2025 and large volumes of soybean processing, the increase in soybean oil supplies will limit the rise in US soybean oil futures. A monthly report released by the National Oilseed Processors Association (NOPA) showed that due to several new processing plants coming on line and a record U.S. soybean crop, soybean processing volume at NOPA member facilities in the U.S. rose to a record 206.6 million bushels in December 2024. As of December 31, 2024, soybean oil inventories at NOPA member organizations increased to 1.236 billion pounds, up 14% from the previous month and the highest since July 2024. In addition, Trump’s biodiesel subsidies could be cut, resulting in lower use of soybean oil biodiesel and lower soybean oil consumption.

Domestic soybean oil supplies are ample

Thanks to abundant soybean harvests in the United States and South America, China’s imports of soybeans, soybean oil, etc. have been relatively flat. Prior to the festival, coastal soybean and soybean oil stocks were at relatively high levels. In addition, the processing rate of oil mills was relatively high. At present, domestic soybean oil supplies are relatively adequate. In contrast, as the peak consumption season during the Spring Festival passes, domestic consumption of vegetable oils, including soybean oil, will enter a brief period of slack, and an oversupply of soybean oil in the short term will hamper the upward trend in soybean oil demand.

As imported soybean supplies recover, China’s imported soybean stocks surged again, approaching the highest level in nearly three months. According to the monitoring data, as of the second week of 2025, total domestic imported soybean stocks reached 6.063 million tons, up 376,000 tons from 5.687 million tons in the previous week and slightly lower than 6.085 million tons in the same period last year, but still at a relatively high level compared with the same period in history. Of these, coastal stocks totaled 5.299 million tons, up 398,000 tons from 4.901 million tons in the previous week and higher than 5.089 million tons in the same period last year.

After the Spring Festival holiday, there is usually an off-season for soybean oil demand, and the downstream harvest volume gradually declines. However, with the resumption of production in the livestock industry, the demand for soybean meal will tend to increase, the processing volume of oil mills will recover, soybean oil production will increase, and the increase of soybean oil stocks in oil mills will become a highly likely event. The temporary oversupply situation in the domestic soybean oil market will become increasingly evident, which will restrain soybean oil prices.

Weakness in palm oil is dragging down soybean oil

In contrast to the fall and recovery of US soybean oil futures, after forming a double top pattern in mid-December last year, Malaysian palm oil futures fluctuated to the downside, showing a clear decline. Although palm oil production in Malaysia and Indonesia is still in contraction and production continues to decline month-on-month, stocks could still rise due to low exports. Moreover, the price difference between soybean oil, rapeseed oil and palm oil is too small, making palm oil less profitable and discouraging its consumption. After February, major palm oil producing countries will enter the cycle of increasing production, which will be even more unfavorable to the strengthening of palm oil and cannot promote the demand for soybean oil.

Indonesia’s palm oil stocks rose 3.2% month-on-month to 2.58 million tons in November 2024 as slowing exports offset the impact of falling production, according to monitoring data. Data from the Southern Peninsula Palm Oil Producers Association (SPPOMA) showed that Malaysia’s palm oil production in January fell 15.19% from the previous month. Data released by independent inspection company AmSpecAgri showed that Malaysia’s palm oil exports in January totaled 1.1035 million tons, down 20.1% from the previous month.

To summarize, it is hard to find positive news for foreign beans, while palm oil suffers from negative news. In addition, soybean oil demand has weakened since the holidays, so soybean oil futures are finding it difficult to bottom and go up, and will likely continue to fluctuate weakly.

Domestic oil prices remain strong

China’s domestic rapeseed and palm oil prices are expected to remain generally stable this week, while soybean oil prices may continue to rise. After consumption during the Spring Festival holiday, domestic terminals will need to replenish stocks, which will increase demand for soybean oil, and queues for the commodity may arise at various locations.

As for palm oil, the palm oil basis is temporarily stable, with a slight weakening in some localized areas. With the price increase in the place of origin, the import profit in China is still inverted.

As for rapeseed oil, as tensions between the United States and Canada eased, U.S. President Donald Trump on Monday postponed his plan to impose duties on Mexico and Canada for one month, boosting the Canadian rapeseed market. China will keep an eye on rapeseed and rapeseed oil entering the country in the first quarter.

Oils and fats market outlook

To summarize, in the short term, China’s oil and fats market will be supported by favorable factors during the holiday period, and conditions may continue to remain strong. In the medium term, with the completion of downstream stocking, domestic spot demand for basic oils and fats will enter the seasonal off-season phase. Factories have gradually resumed operations after the holidays. Coupled with unstable soybean supply, China National Grain and Oilseed Corporation may also start buying for the new year. Thus, soybean oil supply may gradually become unstable. At a later stage, we will continue to focus on changes in external markets, especially the direction of Sino-US trade relations and overall soybean production in South America. Next week, the USDA’s monthly supply and demand report and the report from MPOB will be released.

Tags: soybean oil, China