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The ongoing drought in Argentina has raised concerns about soybean production and soybean oil supply, impacting global market dynamics. Argentina, a key player as the world's third-largest soybean producer and leading exporter of soybean oil and meal, is projected to harvest from 52 to 55 million metric tons (mmt) from 18.5 million hectares (ha) in 2025. While 92% of crops are currently rated in good to excellent condition, low rainfall in early Jan-25 could hamper yields in Argentina, Paraguay, and southern Brazil. However, improved rainfall expected later in Jan-25 offers hope for recovery, potentially stabilizing production and price volatility.
In W2, soybean oil prices in Bangladesh have risen amid a supply shortage in the retail market, with bottled soybean oil now priced at USD 1.42 to 1.44 per liter (BDT 173 to 175/L), up from USD 1.38 to 1.42/L (BDT 168 to 173/L), reflecting a 1.46% week-on-week (WoW) increase. The Bangladesh Vegetable Oil Refiners' and Vanaspati Manufacturers' Association (BVOVMA) has proposed a price adjustment to align with global market trends, citing rising import costs despite recent value-added tax (VAT) reductions on palm and soybean oil. The price adjustment aims to ensure sufficient supply during Ramadan. Import-dependent supply constraints continue to challenge market stability.
The United States Department of Agriculture's (USDA) World Agricultural Supply and Demand Estimates (WASDE) latest report projects an increase in US soybean oil exportable supply for the 2024/25 cycle to 730,000 metric tons (mt), up from 500,000 mt in Dec-24. Despite this bearish outlook, soybean oil prices surged, with the Mar-25 contract on the Chicago Mercantile Exchange (CME) closing at USD 1,004.8/mt, an intraday increase of USD 62.1/mt. This rise is due to the United States Department of the Treasury's (USDT) new biofuel policy under the 45Z program, excluding imported used cooking oil from tax incentives. The policy shift is forecasted to boost domestic soybean oil demand for biodiesel production, driving price volatility in the soybean complex.
Argentina's soybean oil prices recently reached USD 1.01 per kilogram (kg) in W2, reflecting a 4.12% increase WoW and an 18.82% rise year-on-year (YoY). This surge is tied to several factors, including the recovery in soybean production following the 2022/23 drought and increased foreign demand. Argentina is a key global supplier, ranking as the leading exporter of soybean oil, with a substantial 68% of its production destined for international markets, particularly India. The country's soybean oil output, having grown 45% YoY to 8 mmt by Nov-24, remains vital for both domestic and global markets, fueling not only food and cosmetics industries but also biodiesel production.
The uptick in soybean oil prices is expected to continue to influence global market dynamics, particularly in the biofuels sector, where biodiesel production from soybean oil has shown a 20% recovery in 2024. The price increase could result in higher export revenues, further strengthening Argentina’s position as a major contributor to global vegetable oil supplies. However, any fluctuations in production or policy changes, particularly in major consumer countries like India, could significantly impact future price trends and global availability.
Brazil's soybean oil prices fell to USD 1.16/kg in W2, reflecting a 5.69% WoW drop. The ongoing record soybean harvest in Brazil continues to exert downward pressure on prices, exacerbated by a depreciated local currency. This has led to lower-than-expected soybean export projections for Jan-24, with an estimated 1.71 mmt, down from 2.40 mmt in Jan-24, although it represents an increase from Dec-24's 1.47 mmt.
This reduction in export volume could further strain Brazil's soybean oil market, contributing to downward pressure on prices in the short term. The balance between production and export demand will be crucial in determining whether this trend continues, with future pricing largely dependent on export volumes, currency fluctuations, and global market conditions.
In W2, United States (US) soybean oil prices rose by 5.75% WoW, primarily due to a combination of factors, crude oil prices reached their highest point in three months, and there is growing speculation that the US government may tighten policies on biofuels produced from imported cooking oil. Additionally, the latest USDA report showed a reduction in US soybean stocks for the 24/25 campaign, further supporting price gains.
In W2, soybean oil prices in the Netherlands rose to USD 1.07/kg, marking a 2.88% WoW and 10.31% YoY increase. However, the outlook for the 2024/25 marketing year (MY) is less optimistic, as European Union (EU) soybean oil imports are expected to fall by 64%, weakening demand. This decline is further compounded by projections of record global soybean harvests in 2025 and increasing regulatory pressures, such as the EU Renewable Energy Directive (RED) and the European Union Deforestation Regulation (EUDR), which could restrict soybean oil's role in biofuels. These factors suggest that while current prices are rising, future price stability could be challenged by weakening demand and tighter regulatory environments.
Spain’s soybean oil prices increased to USD 1.32/kg in W2, reflecting a modest 0.76% WoW rise and an 11.86% YoY increase. Despite a growing interest in non-genetically modified (non-GMO) soybeans, Spain faces significant challenges in expanding domestic soybean cultivation, particularly in regions like Castilla y León, due to low yields, agronomic issues, and competition from larger global producers. Consequently, Spain remains reliant on soybean oil imports, which exposes the market to fluctuations in international prices. Ongoing global supply chain disruptions and regulatory changes may further influence Spain's price stability, potentially leading to higher volatility in future price trends.
To mitigate the risks associated with the global soybean oil supply disruptions, such as droughts in Argentina and fluctuating export dynamics in Brazil, stakeholders should explore diversifying their supply sources. Additionally, increasing focus on the growing demand for soybean oil in biodiesel production, especially in countries like the United States, could help stabilize the market by tapping into emerging energy markets.
Given the significant price volatility observed globally, including in Spain and Bangladesh, producers and importers should consider hedging strategies to mitigate risks from price fluctuations. Improving stock management, including creating buffer stocks during low-price periods and optimizing distribution channels, would allow stakeholders to manage the impacts of supply disruptions and price swings.
While Spain faces challenges in expanding domestic soybean oil production, investing in non-GMO soybean varieties and improving yield efficiency through advanced agricultural practices could reduce reliance on imports. This would decrease exposure to international market fluctuations, enhancing long-term price stability and supply security for domestic markets.
Sources: Tridge, Terre-net, Agri Total, Infobae, Oil World, Canal Rural
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