Vegetable oil prices have generally declined since last week’s report, mainly due to bearish updates in the soybean supply and demand (S&D) data from WASDE. This downturn offset an 8% week-on-week increase in Brent Crude Oil prices and a bullish July report from the Malaysian Palm Oil Board (MPOB). The market remains focused on the expectation that global soybean supply will exceed demand. Additionally, U.S. farmers are actively selling to clear storage, which is putting further pressure on prices for soybeans, soybean oil, and competing oilseeds and oils.
WASDE increased the 2024/25 planted area for U.S. soybeans from 86.1 million acres to 87.1 million acres and raised production estimates from 4.450 billion bushels to 4.589 billion bushels, which aligned with market expectations. Global 2024/25 soybean ending stocks were revised upward to 134.30 million metric tons from 127.76 million metric tons. For 2023/24, world soybean ending stocks also saw an increase to 112.36 million metric tons from 111.07 million metric tons.
U.S. farmers have been working to clear last year’s corn and soybean crops from storage ahead of the upcoming autumn harvests. The U.S. dollar continued its recovery, as shown in the figure below, following improvements in global markets and new U.S. labour market data that revealed a larger-than-expected drop in unemployment benefits last week, easing fears of an imminent recession. The stronger dollar made U.S. exports less attractive, particularly as Chinese demand for U.S. soybeans remains low.
Overall, these factors have led to a $12 per metric ton decrease in CBOT soybean oil prices, bringing them down to $372 per metric ton. The combination of bearish soy S&D updates from WASDE, a recovering U.S. dollar index, and active selling by U.S. farmers has put pressure on the CBOT soy complex.
However, the Vesper Argentina Forward Price Index for Crude Soybean Oil (2024-08-12) increased to €834 | $911 per metric ton (FOB Up River, October) from €814 | $889 per metric ton on 2024-08-05. Last week, Argentinian oilseed workers went on strike, demanding higher wages. The halt in production and shipments proved costly for trading houses and processing plants, which likely contributed to the week-on-week price increase in Argentina’s benchmark, despite the declining CBOT prices. The strikes have since ended this week.
Outlook
Vesper’s machine learning model predicts a slightly bearish price trend for CBOT soybean oil both in the short and longer term, see Figure below.
The market sentiment is aligned with the model’s short term outlook. The most significant pressure is likely to come from an anticipated ample U.S. soybean harvest. Over the next 2-3 weeks, the market will be closely watching U.S. weather conditions and farmer selling activity. Furthermore, peak palm oil production expected in August and October, as well as market anxiety regarding the state of the U.S. economy can be weighing.
Market sentiment diverges from the longer-term ML outlook, suggesting that a potential shortage of sunflower seed and rapeseed supplies, coupled with an uncertain recovery in palm oil production, might offset a soybean surplus and push prices higher. Also, markets expect to see some additional demand for U.S. soybean oil from Sustainable Aviation Fuel (SAF) producers. Future price increases could also result from potential U.S. tariffs on used cooking oil. The likelihood of this has risen following the EPA’s confirmation of investigations into biofuel producers using UCO, as the agency seeks to ensure that the
UCO being used is genuine and not subject to fraud.
Tip: If you’re interested in learning more about how Vesper’s price forecasts are created, feel free to schedule a short call with one of our commodity experts.
