Soybean oil market is expected to experience a worsening shortage

The global soybean oil market continues to demonstrate a steady upward trend, supported by a complex set of interrelated factors, reports SunSir. Commodity market dynamics are playing a key role: despite a decline in the premium for Brazilian soybeans, prices on the Chicago Board of Trade (CBOT) are showing strong growth, offsetting this decline. The situation is exacerbated by changes in China’s trade policy, where the reduction of import duties on American soybeans from 23% to 13% has not eliminated the competitive advantage of Brazilian raw materials, which are subject to a tariff of only 3%.

An important market driver is the expectation of a revised forecast for the USDA’s November report. Analysts anticipate an increase in American soybean yields and exports, while ending stocks are declining, creating an additional positive backdrop. These expectations are reinforced by unfavorable weather conditions in the main soybean-producing states of the United States, where a rainfall deficit could lead to yields falling below the projected 53.5 bushels per acre.

The Chinese domestic market remains challenging: despite record soybean imports (95.68 million tonnes in January-October) and high crushing volumes, supply significantly exceeds demand. Commercial soybean oil stocks have reached 1.199 million tonnes, a seven-year high, while crushing margins remain negative. Consumer demand is limited by slowing revenue growth in the food service sector and cautious purchasing policies by trading companies.

A related market environment is having a significant impact: the palm oil sector is transitioning to a seasonal production cut following record levels in October, when Malaysian production reached 2.04 million tonnes. Although current palm oil stocks remain elevated (2.46 million tonnes), the market is gradually shifting its focus to expectations of inventory reductions in the coming months. Uncertainty remains surrounding the prospects for the B50 program in Indonesia, where there is pressure to revise plans to transition to 50% biodiesel fuel by 2026.

It was previously reported that since October, export prices for soybean oil based on South American offers have maintained an upward trend, despite the rather favorable progress of the soybean sowing campaign for the new crop in Brazil.

Tags: China, soybean oil, Brazil, prices, soybean, USA