W14 Soybean Oil Update: Increased Processing in the US, India's Rising Demand Amidst Global Shifts

US Soybean Processing Volume Surges in Feb-24

In Feb-24, soybean processing volume in the United States (US) surged by 10% year-on-year (YoY) compared to Feb-23, reaching 5.28 million metric tons (mmt), an increase of 470 thousand metric tons (mt). However, there was a 20 thousand mt decrease compared to Jan-24, with analysts not specifying the reasons for these fluctuations. Specific data on oil production are unavailable, though domestic consumption of soybean oil in the US increased by 6%, reaching levels seen in Oct-23, yet exact figures were not provided.

Rising Demand for Soybean Oil in India Signals Opportunities for American Agricultural Exports

The demand for soybean oil in India has increased gradually, signaling potential growth in American agricultural exports. Traditionally, India heavily relied on palm oil and sunflower oil imports, but with the onset of the Ukraine conflict, soy oil imports from South America, including the United States (US), have gained traction. In Mar-24, Indian soybean oil imports surged by 27% MoM, reaching 220 thousand mt, while sunflower oil imports rose by 51% MoM to 448 thousand mt. This import surge represents India’s highest combined total of edible oil imports in six months.

Increased Demand for Soybean Oil in US Renewable Diesel Production and Implications for Processors and Markets

The demand for soybean oil as a feedstock in renewable diesel production is increasing in the US as the nation aims to adopt cleaner fuel alternatives. According to a recent CoBank report, US soybean processors are expanding their production capacity by 23% over the next three years to meet this growing demand. Despite record-high profit margins in recent years, processors may face margin moderation due to increased competition from alternative feedstocks and surplus soybean meal. Legacy processing plants with low debt levels are forecasted to remain profitable, but new high-cost plants and those outside soybean-growing regions face financial risks. Although rising demand for soybean oil will support prices, competition from imported vegetable oils is growing. The expansion of US soybean processing capacity will lead to increased soybean meal supplies, which could pressure processor margins unless domestic livestock supplies absorb the surplus. Amidst flattening US animal protein production, broiler integrators are expected to benefit from growing soybean meal supplies, with export markets becoming increasingly important.

Ukrainian Soybean Exports Witness Decline in Mar-24 Amidst Seasonal Fluctuations

Ukrainian soybean exports totaled 227 thousand mt in Mar-24, marking a 30% month-on-month (MoM) decrease and nearly a 50% YoY decline compared to Mar-23. However, cumulative exports since the beginning of the 2023/24 season amounted to 2.45 mmt, surpassing the corresponding period of the previous marketing year.

Ukraine's soybean exports for 2023 reached 3.5 mmt, a significant increase from 2022 and 2021. In terms of soybean processing products, soybean oil exports in Mar-24 amounted to 34 thousand tons, higher than the preceding two months. Over the first seven months of the 2023/24 season, Ukraine exported 202 thousand mt tons of soybean oil, exceeding the same period in the previous season. During the 2022/23 season, Ukraine exported approximately 277 thousand mt of soybean oil, equivalent to 1.4 to 1.5 mmt of soybeans. Experts forecast that of the 4.8 mmt of soybeans collected in the current season, 1.6 to 1.7 mmt can be processed domestically, while the remainder, around 3 mmt, will be exported.