W39: Soybean Oil Update
In W39 in the soybean oil landscape, on September 26, soybean oil futures for Oct-23 delivery on the Chicago Commodity Exchange (CBOT) closed up 0.19% to USD 0.5868 per pound (lb). This rise was supported by data from the United States Department of Agriculture (USDA), which showed a 2% deterioration in crops in good/excellent conditions compared to the previous week, causing investment funds to question the yield outlook for the tight American harvest. On September 27, the Oct-23 soybean oil contract rose further to USD 0.5961/lb as the market adjusted positions ahead of the USDA's quarterly inventory report, scheduled for release on Friday. However, on September 28, soybean oil futures closed down by 1.81% at USD 0.5853/lb due to profit-taking after four consecutive increases.
The USDA forecasts that global vegetable oil production for the 2023/24 season will reach 222.8 million metric tons (mmt), up 6.5 mmt from the previous year (2022/23). Soybean oil production is forecast to increase by 2.9 mmt to 61.6 mmt in the 2023/24 marketing year (MY), potentially reaching its peak. China will lead as the primary producer with 17.2 mmt while the United States (US) ranks second with 12.2 mmt in production.
In Aug-23, the Food and Agriculture Organization (FAO) Vegetable Oil Price Index averaged 125.8 points, marking a 3.1% decrease month-on-month (MoM), following a brief increase in July. Low global prices for palm, sunflower, soybean, and rapeseed oils drove this decline. Notably, soybean and rapeseed oil prices have fallen due to improved growing conditions for soybeans in the US and abundant global supplies available for export.
From Jun-23 to Aug-23, Pakistan imported 907 thousand mt of vegetable oil, a 42% year-on-year (YoY) increase. This import included 69 thousand mt of soybean oil, with the overall rise in oil imports attributed to a sharp decline in Pakistan's domestic soybean oil production. This decline was due to slowed soybean imports in recent months, primarily caused by the absence of a legal framework for genetically modified (GM) oilseeds. Furthermore, the estimated imports for the 2022/23 MY include 211 thousand mt of soybean oil, representing an increase of 48 thousand mt.
In the week ending September 21, the US exported 4,700 mt of soybean oil from the 2022/23 harvest. This volume represents a notable increase compared to the previous week but is significantly lower than the average of the past four weeks. Canada emerged as the primary buyer which offset the cancellations made by Honduras, which canceled an order for 100 mt.
Lastly, during the week of September 13 to 20, the price of soybean oil on the international market held steady at USD 1,457.9/mt. Expectations were lower due to seasonal pressure from the soybean harvest in the US and Brazil. However, this decline was offset by an increase in oil prices. Throughout 2023, the value of soybean oil has decreased by 5.8% compared to its level of around USD 1,550/mt at the end of 2022.