The vegetable oil complex has experienced an intriguing turn of events since the publication of USDA’s newest numbers on US soybean stocks, and acreage, which were lower-than-expected. The impact was significant, resulting in noteworthy increases in both physical and futures prices. Surprisingly, despite these changes, import demand has remained steady.

Delving into the USDA’s report, we find figures that played a pivotal role in the price surge across various indexes. The projected planted area for US soybeans in 2023 is anticipated to shrink by 5%, settling at 33.8 million hectares compared to the previous year. Furthermore, the report highlights that as of June 1, US soybean stocks stood at 21.7 million metric tons, marking an 18% decline from the previous year and falling below the expectations of most traders. Additionally, the USDA’s crop progress report for the week ending July 2 reveals a slight decrease of 1% in the percentage of US soybean crops rated as being in good to excellent condition, reaching a modest 50%.

Analysing the data compiled by Vesper’s platform, the impact of the USDA report becomes even more apparent:

  • The CBOT price for soybean oil experienced a remarkable increase of €131 | $143 per metric ton since the previous week, reaching €1355 | $1478 per metric ton on July 3, 2023, representing a significant rise of 12.60%.
  • Similarly, the Vesper Forward Price Index for crude soybean oil in West EU surged by €90 | $97 per metric ton, reaching €1020 | $1113 per metric ton on July 4, 2023, a substantial increase of 9.68
  • The Vesper Forward Price Index for crude soybean oil in Argentina witnessed a modest rise, climbing by €17 | $17 per metric ton since the previous week, reaching €954 | $1041 per metric ton on July 3, 2023.

Despite the recent rally in soybean oil prices, we foresee a bearish trend looming in the mid-to-long term for the market. While the USDA’s report indicates lower-than-anticipated US soybean acreage and stocks, there is still optimism for a substantial soybean crop in the United States, thereby maintaining the market’s underlying fundamentals. The USDA projects a 7% rise in global oilseeds production for the 2023/24 period, with only a 4% increase in crush and export and import volumes expected to remain stable.

Notably, Brazil is exhibiting a robust performance this year, with its soybean crop estimated at 156 million metric tons, marking an increase of 1 million metric tons from the previous month, and revised exports reaching 97 million metric tons. OilWorld even suggests that Brazil could export 96.3 million metric tons of soybeans this year, a notable increase of 17-18 million metric tons compared to 2022.

Despite the volatile weather conditions we currently find ourselves in, and the possibility of further volatility throughout July and August, we must consider the broader context. The high carryover stocks in importing countries, coupled with a potentially sluggish economic outlook that may dampen consumption, leads us to conclude that the fundamental situation remains bearish. So, while the market experiences its fair share of ups and downs, it is important to consider the broader landscape and anticipate what lies ahead.

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