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Factors Affecting Soybean Oil Prices in the US
Factors Affecting Soybean Oil Prices in the US

Factors Affecting Soybean Oil Prices in the US

  • 06-Mar-2023 6:22 PM
  • Journalist: Motoki Sasaki

Vegetable oils are and have become one of the most significant sources of fat and energy in the human diet, especially in light of the rising hustle and bustle in the rapidly changing world. Derived from an array of vegetable sources, oils are extracted and processed for a variety of food applications. The criteria for product evaluation in industries is important for both buyers and sellers in the demanding and cutthroat market for edible fats and oils. Due to the economic qualities and high-quality oil that Soybeans generate, they are the most common source of oil-producing grains worldwide (around 60%). The majority of the protein in Soybeans, almost 40%, is also found in significant concentrations in the form of oil, between 18-22%. By volume, Soybean Oil is the most popular kind of edible oil consumed in the United States after China.

Source: United States Department of Agriculture

Soybean Oil is liquid at low temperatures and beneficial to health due to its characteristics, which are primarily influenced by the concentration of polyunsaturated fatty acids in the form of high linoleic (54,87%). Due to these, applying Soybean Oil to different food products is greatly preferred. The high Omega 3 and Omega 6 content of Soybean Oil makes it very popular. These fatty acids control lipid and cholesterol metabolism and stop veins in arteries from constricting. Furthermore, because of its high Vitamin B concentration, it facilitates digestion and thus avoids constipation and other recurring digestive issues.

Refined Soybean Oil is utilized extensively over the world due to various important factors. Processing Soybeans is primarily done to produce high-quality meals and crude oil. Soybean Oil is a viable option in the food industries to make Oleogels/Organogels, trans-free margarine and creamer, recombined butter, and mono-diacylglycerols. The physical, chemical, and nutritional qualities of the products can also be improved by Soybean Oil.

Economically speaking, producing vegetable protein is far less expensive and cost-effective than producing animal protein, and from an ecological standpoint, producing vegetable protein is much more advantageous than using animal sources. Refined Soybean oil is suitable for a wide range of food products, including salad dressings, cooking oils, and lipid modification procedures. Oleogels, margarine, and other fatty food products can be made using modified Soybean Oil.   

From a geopolitical vantage point, the world is witnessing China emerge with vigor from its COVID-19 lockdown as the United States tries to escape recession while slamming the brakes on inflation. Soybean Oil has changed from being a surplus commodity looking for uses to being a sought-after renewable fuel source. Production of lower-carbon fuels, notably renewable diesel, is set to soar as demand for green energy sources increases globally. Diverging supply and demand trends for Soybean oil have been the primary factor driving the price spread volatility. Prices for Soybean Oil have remained obstinately high in the US domestic market for a long time now.

According to the U.S. Energy Information Administration, the capacity for producing renewable diesel nearly doubled from 971 million gallons annually in May 2021 to 1.92 billion gallons annually in May 2022. An industrialist reports that during that period, there was not much of a Soybean Oil supply, which caused prices to rise to previously unheard-of heights. In the United States, there are now about a dozen new Soybean processing plants or plant expansions under construction, and several newer facilities are in the works. "The soy crush market is attempting to rebalance, although high values for both futures and basis are still being seen." Healthy margins, as a result of that, are being invested in industry growth, causing significant fluctuations in the US Soybean market.

Despite a significant narrowing since the beginning of the year, price disparities between palm oil and Soybean Oil are still exceptionally broad on a historical basis. However, as 2023 progresses, spreads between the two most common vegetable oil prices, which many food firms take into account when making purchasing decisions, might revert to much larger levels. Due to ongoing supply constraints in the US and robust demand from the end-user sectors, front month Soybean futures prices are still trading at unprecedented levels.

Market players are still doubtful about whether Soybean futures prices will stay higher for the latter part of 2023, despite the fact that the outlook for prices is likely to be firm at these higher levels in the short term due to limited ending stocks. According to the USDA data from January 2023, this nation produced 4.276 billion bushels of Soybeans during the 2022–2023 crop year. On the demand side, around half of the Soybeans, the nation's produce, is exported, with the other half being crushed into the meal. As a matter of fact, total Soybean sales have surpassed the USDA prediction for the 2022–2023 marketing year by 84.9%, compared to a 5-year average of 76.4%.

Demand in the US is also anticipated to be supported by Soybean Oil's expanding usage as a feedstock in the production of renewable diesel, a development that has prompted Soybean Oil to increasingly trade roughly in sync with crude oil prices. According to the National Agricultural Statistics Service (NASS) of the USDA, U.S. Soybean production will climb this year on the strength of improved yields to 4.5 billion bushels, up 5% from 2022. The same number of acres as last year, 87.5 million, will be planted with Soybeans, but the average yield is predicted to be 52 bushels per acre.

The demand for Soybean crushing in the United States has also been quite strong, and it is anticipated that the market for renewable diesel will expand rapidly. The number of soy crush facilities now in operation in the United States is thought to be 60, according to the American Soybean Association in November 2022. An expert in the field claims that increasing the production of renewable diesel is the main trend in the Soybean business. The demand for Soybean Oil is driving up U.S. crush while also keeping Soybean exports below what they otherwise would be due to increased U.S. capacity to generate the fuel. A record 2.31 billion bushels of Soybeans are expected to be crushed in the upcoming period, according to NASS. Due to the limited global vegetable oil supply and several announcements to boost renewable energy sources, Soybean Oil prices have significantly climbed since the beginning of 2021.

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