W3 Soybean Oil Update: Argentina's Higher Soybean Output Eases Impact on Global Soybean Oil Trade Amid Brazil's Harvest Reduction in 2023/24 MY

Record Soybean Crushing in North America in Dec-23

In Dec-23, soybean crushing in North America reached a record volume of 195.328 million bushels, surpassing the previous month's 189.04 million bushels. The North American Vegetable Oil Processors Association (NOPA) reported this figure, exceeding market expectations of 193.12 million bushels. Additionally, American soybean oil stocks in Dec-23 totaled 1.36 billion pounds (lb), surpassing the expected 1.291 billion lb and 1.214 billion lb achieved in Nov-23.

Argentina's Soybean Output Mitigates Impact on Global Soybean Oil Trade

The United States Department of Agriculture (USDA) revised Brazil's soybean harvest estimate for the 2023/24 marketing year (MY) to 157 million metric tons (mmt), a reduction of 4 mmt due to the impact of recent droughts in key production regions. Combined with significant carryover stocks, this adjustment acts as insurance for farmers. Meanwhile, Argentina's soybean production estimate was increased from 48 to 50 mmt, offsetting potential negative impacts on global soybean oil and meal trade resulting from Brazil's reduced oilseed crop.

Brazil Expected to Cut Soybean Exports in 2024 Due to Increased Domestic Demand for Biodiesel

The National Supply Company (Conab) predicts a significant 36% year-on-year (YoY) reduction in Brazil's 2024 soybean exports to 1.5 mmt, primarily due to adverse weather conditions, especially in Mato Grosso. Simultaneously, the approval by Brazil's National Energy Policy Council (CNPE) to increase the biodiesel level in diesel fuel from 12% to 14% is poised to boost domestic demand for soybean oil. This shift is expected to lead to a 1% YoY increase in soybean oil production to 10.96 mmt, with an 18% surge in soy oil usage for biodiesel and a resultant 4% decrease in stocks to 485 thousand metric tons (mt).

India's Extended Edible Oil Import Duty Until Mar-25

Along with reduced production, India's decision to extend import duty cuts on edible oils until Mar-25 contributed to increased palm oil prices in Malaysia. Lower import duty structure in India, the world's leading vegetable oil importer, covers crude palm oil, crude sunflower oil, and crude soybean oil and was set to expire in Mar-24.

Egypt's Soybean Oil Tender Prices Stable Due to Argentina's Revised Harvest Forecast

On January 18, the Egyptian state operator GASC conducted an international tender for the purchase of vegetable oils with Mar-24 delivery and payment terms of 180 or 270 days after the opening of the letter of credit. Soybean oil offers decreased from 14 to 5, with prices remaining stable at USD 975 to 993/mt C&F for 180 days payment and USD 1035 to 1210/mt C&F for 270 days payment. Low prices for soybean oil are due to the upward revision of soybean harvest forecasts in Argentina, expected to range from 50 to 55 mmt, compared to the previous year's 25 mmt. The harvesting in Argentina is scheduled to begin in Mar-24. Notably, while most of Argentina's harvested soybeans go for processing, Brazil predominantly exports them.