1. Weekly News

Global

USDA Lowered FY 2024/25 Global Vegetable Oil Production and Consumption Forecast

In Aug-24, the United States Department of Agriculture (USDA) lowered its global vegetable oil production forecast for the 2024/25 fiscal year (FY) to 227.1 million metric tons (mmt), a decrease of 0.95 mmt from the Jul-24 forecast due to significant reductions in sunflower and palm oil outputs. However, soybean oil production has been revised by 0.16 mmt, reaching 65.52 mmt. The forecast for global consumption of vegetable oils in FY 2024/25 was also reduced by 0.54 mmt from the previous estimate to 224.38 mmt. The world-ending stocks forecast also declined by 0.31 mmt to 30.06 mmt, driven by reductions in palm and sunflower oil inventories. Dec-24 soybean oil futures in Chicago dropped to their lowest levels since late 2020 following the release of the USDA’s report.

Kazakhstan

East Kazakhstan Emerges as Key Hub for Oil and Fat Industry

The East Kazakhstan region has become a major center for the oil and fat industry, processing more than 60% of Kazakhstan's agricultural products. The area hosts 12 enterprises dedicated to oilseed processing, producing 255 thousand metric tons (mt) of vegetable oil annually, accounting for 38% of the country's total sunflower oil production. In 2024, the soybean, rapeseed, flax, and sunflower sowing areas are expected to expand by 13 thousand hectares (ha). Additionally, the completion of a new oil extraction plant, Altai Mai LLP, and an oil refining workshop, Altyn Shygys LLP, which is set to be completed in 2025, is anticipated further to enhance the region's vegetable oil production capabilities.

Bangladesh and Russia

Bangladesh Emerges as Promising Market for Russian Soybean Oil

Russia's agricultural exports to Bangladesh have significantly increased recently, with wheat being the dominant trade product. This growth created opportunities for other products. The director of Russia's Grain Quality Assessment Center (GQAC) stated that Bangladesh has emerged as a promising export market for Russian soybean oil. Bangladesh's soybean oil imports have increased significantly in recent years, with Brazil, Argentina, and Paraguay as their primary suppliers. In the 2023/24 season, the country consumed 900 thousand mt of soybean oil, with 575 thousand mt imported. Despite increased domestic production, Bangladesh is expected to raise its soybean oil imports to 890 thousand mt by the 2032/33 season.

2. Weekly Pricing

Weekly Soybean Oil Pricing Important Exporters (USD/kg)

Yearly Change in Soybean Oil Pricing Important Exporters (W33 2023 to W33 2024)

Argentina

In W33, Argentina's soybean oil price dropped to USD 0.89 per kilogram (kg), making 1.11% week-on-week (WoW), 4.3% month-on-month (MoM), and 9.18% year-on-year (YoY) decreases. Soybean futures prices have declined for three consecutive weeks due to ample supply from the United States (US) and Brazil, falling to their lowest since 2020. According to the USDA's Aug-24 report, global soybean production in the 2024/25 season is forecasted to reach 65.52 mmt, an increase of 0.16 mmt from the previous estimate. In addition, China's slow economic growth brings more uncertainties to the global oil market.

Brazil

Soybean oil prices in Brazil increased by 5.1% WoW to USD 1.03/kg in W33 from USD 0.98/kg the previous week, marking a 7.29% MoM rise and a 3.74% YoY drop. The short-term price rise is due to the shifting export demand due to Argentina's logistics challenges. The weak US dollar and record soybean harvest in the US continue to influence the price in Brazil. Domestic prices are expected to remain stable due to producers' reluctance to sell at the current price level.

United States

US soybean oil prices dropped 3.26% WoW to USD 0.89/kg in W33, reflecting a decrease of 11.88% MoM from USD 1.11/kg in W30 and 39.86% YoY from USD 1.48/kg in W33 2023. Soybean futures prices declined this week due to record harvest in the 2023/24 season and increased ending stocks forecast for the 2024/25 season. The stiff competition from Brazil and Russia has limited the demand for US soybeans. Furthermore, concerns about China's economy and falling corn futures prices have further impacted the prices.

Netherlands

The Netherlands’ soybean oil prices decreased to USD 1.01/kg in W33, marking a 0.98% WoW drop from USD 1.02/kg the previous week. Global soybean oil prices experienced some recoveries this week due to technical buyings after a decline in W32. The European Union (EU)’s oil seed crushing increased by 9.5% MoM to 3.25 mmt in Jul-24 after a three-month decline, which is expected to stabilize the Netherlands oil market.

Spain

In W33, Spain's soybean oil prices increased by 0.83% WoW to USD 1.22/kg, reflecting a 5.17% MoM rise and a 3.94% YoY decline. Spain's soybean oil prices have surged due to two consecutive years of drought, leading to historically low olive harvests. The Agrarian Association of Young Farmers of Jaén (Asaja) manager and spokesman recently noted that while prices are reaching historical highs, this increase does not offset the rising production costs, including fuel, fertilizers, and labor. The price spike, therefore, fails to compensate for the overall economic strain on producers.

3. Actionable Recommendations

Expand Export Opportunities

Given Bangladesh's rising demand for soybean oil and its emerging role as a market for Russian exports, there is an opportunity to increase market penetration. Companies exporting soybean oil should explore partnerships with Bangladeshi importers and distributors. Highlight the competitive advantages of sourcing from Russia, such as proximity and favorable trade terms, while also considering expanding market share by targeting growth beyond traditional suppliers like Brazil and Argentina.

Leverage Regional Production Growth

With East Kazakhstan's expansion in oilseed processing and the expected increase in sowing areas, companies operating in or sourcing from Kazakhstan should capitalize on this regional growth. Engage with local producers and consider long-term contracts to benefit from the upcoming production increases. Additionally, evaluate opportunities for joint ventures or partnerships with new plants like Altai Mai LLP and Altyn Shygys LLP.

Manage Price Volatility

With soybean oil prices declining due to ample supply from the US and Brazil, Argentine exporters should hedge against further price drops by utilizing futures contracts or other risk management tools. To maintain competitiveness in a volatile market, manufacturers should consider offering flexible pricing terms to buyers, such as index-linked contracts, to maintain competitiveness in a volatile market.

Sources: Tridge, Oil World, Graintrade, UkrAgroConsult