Tags: Commodity Markets
Soy bean and soybean oil on wooden table

Soybean Oil Price Historical Overview and Facts Worth Knowing

During the 2015–2016 crop year and the 2019–2020 crop year, global soybean oil supply grew at a steady 3 percent CAGR. Output for the current crop year (2019–2020) is expected to decline by 2-3 percent compared to the previous crop year (2018–2019). Still, the overall supply is expected to increase due to the prior year’s high carryover stocks.

Low yields in the previous season discouraged farmers from planting soy in major producing regions. Thus, resulting in a decrease in soybean planting area in 2019-2020. In 2019-2020, biodiesel demand was expected to fall short of overall industrial demand. What is going on right now?

Let’s take a look at the main factors that affect the soybean oil price.

Price Comparisons

US suppliers set soybean oil prices and contract structures by combining CBOT soybean oil futures with the basis and freight costs. The disparity between cash and futures prices is the basis. The determining factor of buyers’ profit margin is the time of purchase, sale, and the price of the soybeans. Soybean production and crush margins play a major role in deciding soy oil prices.

The Value Chain of Soybean Oil

The value chain and prices of soybean oil became influenced by by-products, raw material availability, and crushing economies. Approximately 82 percent of all soybeans produced in the world become crushed, with 18 percent of oil and 82 percent of meal produced.

Due to its utility in the end-use market, the soybean oil price plays a major role in the soybean value chain’s pricing economies, despite its low share as a by-product.

Analysis of the Global Supply and Demand

Due to increased soybean supply and tightened supply in the other vegetable oil sector, especially the rapeseed oil market, soybean oil supply rose for the past three years.

During the first half of 2018, a rebound in biodiesel demand aided soybean demand.

After the Corona crisis, biodiesel demand has been relatively poor, and soybean oil demand in H1 2020 has been relatively low. Thanks to strong demand from the United States and Asia, soybean oil is the world’s second most common vegetable oil.

China is the world’s largest user of soybean oil, with food being the predominant end-user. As a result of government-led initiatives, China’s population and soybean acreage are rising, increasing soybean oil consumption and production.

Demand Outlook for Soybean Oil in 2019-2020

From 2015–2016 to 2019–2020, global soybean oil production and consumption should rise at a CAGR of 2.79 percent and 1.84 percent, respectively. In contrast to the previous year, global production and consumption are projected to rise at 3.4 percent and 2%, respectively, in 2019–2020. China’s accelerated consumption growth will fuel the increased production of soybean oil. China, Argentina, and the United States are the major soybean oil-producing areas. They account for about 62 percent of global soybean oil production.

Global Soybean Oil Demand by Application

Due to a growing share of demand from the food industry, global soybean oil demand has been steadily increasing over the last decade. Soybean oil is most commonly used in food, followed by industrial applications such as biodiesel production. In 2020, global biodiesel production from soybean oil was expected to drop significantly compared to the previous year.

Consumption of Soybean Oil by Country

China, the United States, and Brazil use soybean oil the most heavily. China is the world’s largest soybean oil producer and consumer. Moreover, China absorbs nearly all domestic production (roughly 99 percent). Soybean production sees its main concentration in Brazil, Argentina, and the United States. China imports 64% of the world’s soybeans to export soybean oil.

Exports by Country (2019–2020)

From 2015–2016 to 2019–2020, the global soybean oil trade expanded at a CAGR of just 0.3%, with the bulk of the decline due to the US-China trade war. Because of the decline in palm oil and rapeseed oil production, consumers are becoming more dependent on soy oil, boosting trade in 2019–2020.

India, the world’s largest importer of soybean oil, uses nearly all the oil in food.

With the EU lowering its trade barriers in 2018-2019, trade in the LATAM region resurrected, and this trend continued in 2019-2020.

India (31%) is the largest importer of soybean oil. China (8%), Bangladesh (7%), Morocco (5%), and others (42 percent) trail behind.

Trade Trends in the Global Soybean Oil Market

What is also very important for the soybean oil price are the trade trends. Argentina and Brazil are the world’s largest soybean oil exporters. They account for approximately 56% of global exports. Meanwhile, India is the world’s largest soybean oil importer. Compared to the previous year, the size of the soybean oil market is expected to grow by 4.2 percent in 2019-2020.

Forecast for Soybean Oil

Soybean oil prices in the United States increased in Q1 2019 due to a decrease in Chinese oil demand. Furthermore, the biodiesel industry’s growing use supports the price rise. In Argentina, soybean oil prices show forecasts to remain steady, with a long-term rise of 2–2.5 percent. Prices in Brazil will rise due to increased demand for biodiesel. But exports might become curtailed seasonally due to increased crush rates during the summer.

Oils with High Levels of Oleic Acid

Via various developments, businesses have attempted to phase out margarine-based oils and fats from the food processing sector for years. High oleic oils are one such innovation. Unlike partially hydrogenated fats used in the food processing industry, high oleic oils are rich in mono-saturated fats and do not contain trans fats. Oils rich in oleic acid are heat stable and can therefore be reused.

It is likely to be a breakthrough in soybean oil, which is highly rancid than other vegetable oils. If the researchers can effectively extend the commodity’s shelf life, it would be a game-changer in the industry.

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