1. Weekly News

Brazil

Mato Grosso's Soybean Crushing Dropped by 1.98% MoM in Jul-24

According to the Mato Grosso Institute of Agricultural Economics (IMEA), Brazil's soybean crushing in the Mato Grosso region fell 1.98% month-on-month (MoM) in Jul-24, totaling 1.03 million metric tons (mmt). This reduction is due to scheduled maintenance shutdowns in some agribusinesses. However, the cumulative soybean processing from Jan-24 to Jul-24 increased by 11.29% compared to the same period last year and 13.18% compared to the three-year average. IMEA attributes this growth to increased processing capacity and higher soybean oil and meal demand.

China

China Fined Sinograin Due to Cooking Oil Scandal

China fined state stockpiler Sinograin and six other logistics and edible oil firms a total of USD 1.54 million due to a scandal involving using unclean fuel tankers to transport cooking oil. An official investigation across the Hebei, Tianjin, Inner Mongolia, and Shaanxi provinces revealed that using unclean tankers was widespread. This scandal has severely damaged public confidence in food safety regulations. The incident has sparked public outrage, leading many consumers to turn to more expensive foreign cooking oil brands to ensure food safety. Such incidents continue challenging China's ongoing struggle to restore trust in its food safety system.

United States

US Soybean Oil Prices Increased 6.67% MoM in Jul-24

In Jul-24, the United States (US) soybean oil price increased to USD 1,033 per metric ton (mt), a 6.67% MoM increase from USD 964/mt in Jun-24 and a 37.84% year-on-year (YoY) drop from USD 1,662/mt in Jul-23. The US soybean oil price premium over other major exporters has declined, with the US projected to be a net exporter in 2024/25. This premium was previously driven by increased domestic demand for biofuel production, particularly renewable diesel destined for California. The premium over Argentine soybean oil peaked in the summer of 2023 but has since diminished as the share of soybean oil used in biofuels decreased.

2. Weekly Pricing

Weekly Soybean Oil Pricing Important Exporters (USD/kg)

Yearly Change in Soybean Oil Pricing Important Exporters (W34 2023 to W34 2024)

Argentina

In W34, Argentina's soybean oil price rose to USD 0.92 per kilogram (kg), marking a 3.37% week-on-week (WoW) and a 2.22% MoM rise. However, the YoY prices decreased by 2.13% YoY, reflecting a global oversupply. The country's soybean oil prices recovered this week due to technical buying. Argentina is expected to produce 50.50 mmt of soybeans in the 2023/24 season, more than double the previous season, with crushed volumes expected to reach 40.50 mmt. The significant supply is putting pressure on soybean oil prices.

Brazil

Soybean oil prices in Brazil decreased by 2.91% WoW to USD 1.00/kg in W34 from USD 1.03/kg in the previous week due to sufficient supply. Brazil’s soybean crushing in the Mato Grosso region increased by 11.29% YoY from Jan-24 to Jul-24 due to increased soybean production and strong oil demand from the biofuel sector. Currency fluctuations continue to impact Brazilian goods prices. However, domestic prices are expected to remain stable in the short term as producers are hesitant to sell at the current prices. The market closely monitors the demand situation, particularly in the US market, which influences prices in Brazil.

United States

US soybean oil prices increased by 1.12% WoW to USD 0.90/kg in W34, reflecting a decrease of 4.26% MoM from USD 0.94/kg in W31 and a drop of 38.36% YoY from USD 1.46/kg in W34 2023. Soybean oil futures prices recovered this week due to rising rival oil prices. The concerns about the hot weather at the beginning of the week further supported the prices. However, China's weak import demand due to a sluggish economy and ample supply from the US and Argentina suggest that prices will likely decline in the long term.

Netherlands

The Netherlands’ soybean oil prices increased by 1.98% WoW and 1.98% MoM to USD 1.03/kg in W34. However, the YoY prices declined by 11.21% YoY. Global soybean oil prices get support this week from increasing crushing margins and rival oil prices. However, according to the United States Department of Agriculture (USDA), global soybean oil production will set a new record of 65.5 mmt in the 2024/25 season, which is expected to pressure prices.

Spain

In W34, Spain’s soybean oil prices remained unchanged WoW at USD 1.22/kg, making a 2.52% MoM increase and a 5.43% YoY drop. The global edible oil market faces significant downward pressure due to increased palm and sunflower oil supply, contributing to the decline YoY price. In addition, the increased soybean production in the US further exerted pressure on soybean oil prices. Although technical buying and rising demand from the biofuel sector offer short-term market support, prices are expected to trend downward in the long term.

3.Actionable Recommendations

Capitalize on Increased Production

Argentine soybean oil producers should maximize the opportunities presented by the expected record soybean production in the 2023/24 season, including negotiating favorable export agreements with countries facing soybean oil shortages or higher demand, such as India or China. Additionally, producers should consider scaling up storage facilities to manage the increased supply efficiently and avoid downward pressure on prices during peak harvest periods.

Strengthen Food Safety Measures

Chinese logistics and edible oil firms, including state entities like Sinograin, must implement stricter food safety protocols, particularly in transporting and storing edible oils. Enhanced monitoring systems, regular audits, and adopting tamper-proof containers are crucial steps. Additionally, transparency initiatives such as public reporting of safety standards and compliance can help rebuild consumer trust. Investing in public relations campaigns to address concerns and highlight improvements in food safety standards could also mitigate the impact on consumer behavior.

Monitor Global Production Trends

Dutch soybean oil traders and producers should closely monitor global production forecasts, particularly the record output expected in the 2024/25 season. By staying informed, they can adjust their purchasing strategies, securing inventory during price dips. Additionally, engaging in futures contracts could help mitigate risks associated with price volatility. Expanding storage capacity and enhancing supply chain efficiencies will also enable the Netherlands to manage global supply and demand fluctuations better.

Sources: Tridge, Portal Do Agronegócio, UkrAgroConsult, China News