Low shipment: People converse in a soybean field during harvest season in Deerfield, Ohio. The US soybean oil exports are seen at all-time lows in 2023-2024, accounting for about 1% of global trade. — Reuters
THE US soybean oil supplies have declined significantly in the last couple of months, but so have prices, which is counter intuitive.
Increasing volumes of vegetable oil (vegoil) being imported could at least partially explain this.
National Oilseed Processors Association (Nopa) data on Monday revealed US soybean oil stocks among Nopa members totalled 1.108 billion pounds as of Sept 30.
That was below all trade estimates, the lowest for any month since December 2014 and 24% below the year-ago levels.
A mid-year drawdown of US soyoil stocks is common, but this year’s pace is unusual.
Stocks fell 41% between June and September, the most for those four months since 2014, when stocks declined 52%. The recent five-year average is 13%.
The Sept 30 soyoil stocks held by Nopa members, which account for around 95% of US soybean processing, were also unusually small compared with annual demand expectations.
The US Department of Agriculture (USDA) projects total domestic soybean oil use at a record 27.45 billion pounds in 2023-2024, which began Oct 1.
The Nopa’s end-of-September stocks represent 14.7 days of use, the lowest in more than a decade.
That compares with 19.8 days a year ago and an average of 21.5 days.
Falling prices
Prices may not be reflecting a critically tight US soyoil situation.
The most actively traded Chicago soybean oil futures are at three-year lows for the date, down 20% from a year ago.
Futures have slid more than 15% during the last two months, which is when soyoil stocks started to deviate substantially from normal levels.
Lack of movement in calendar spreads do not indicate escalating supply urgency, either.
Nearby Chicago Board of Trade soybean oil futures contracts are stronger than deferred ones, but the inverses are largely the same as they were two months ago.
Also noteworthy is the price dive for biomass-based (D4) credits, which reached three-year lows last week, falling as much as 45% since early September.
Soybean oil is the main feedstock for US biofuel and renewable diesel production, which generate D4 credits known as Renewable Identification Numbers (RINs).
RINs help ensure refiners’ and importers’ compliance with US biofuel blending laws.
US soybean oil futures traded to all-time highs in 2021 and then again in 2022 as low-carbon fuel mandates were seen rapidly expanding US soyoil demand and production, but the legislated blending volumes have been relatively disappointing.
Rising imports
The US soybean oil stocks may be falling, but both the reduction in exports and influx of vegetable oil from overseas have been somewhat offsetting.
The US soybean oil exports are seen at all-time lows in 2023-2024, accounting for about 1% of global trade.
Additionally, the United States in 2022-2023 became a net importer of soybean oil for the first time ever, though actual soyoil imports have not drastically increased.
Higher US vegetable oil prices, especially in 2022, encouraged imports of soyoil alternatives such as canola oil and used cooking oil to meet domestic biofuel demand.
USDA data shows that 2022-2023 US canola oil imports surged 38% on the year to a record 2.8 million tonnes.
Imports of animal and vegetable fats and oils, including used cooking oil, was up almost 240% on the year, reaching 882,000 tonnes through the first 11 months of 2022-2023. China was the largest supplier, accounting for 37%.
For 2022-2023, the year-on-year increase in imports among canola oil, used cooking oil and other similar vegoils was worth about 1.4 million tonnes.
That compares with estimated 2022-2023 US soybean oil use at 12.2 million tonnes.
The USDA sees US soyoil ending stocks at a seven-year low in 2023-2024 with the lightest stocks-to-use in a decade.
But the agency expects the increasing import trend of alternative vegoils to continue over the next year, maintaining competition with domestic soybean oil.
The USDA also projects US soybean processing will reach record volumes in 2023-2024 despite a disappointing soybean crop, supporting the notion that biofuel policies are shifting US soybean use more toward domestic consumption and away from exports. — Reuters
Karen Braun writes for Reuters. The views expressed here are the writer’s own.
