Soybean Oil Prices Face Downward Pressure, Despite Optimistic Supply Fundamentals In US

In the week ending September 24, significant strides were made in the US soybean harvest, with progress reaching 12%. This marked a notable increase of 7 percentage points (p.p) compared to the previous week's figures. It's worth emphasizing that this progress outpaces that of the previous year by 5 p.p and exceeds the five-year average by 1 p.p, as indicated by the USDA's Crop Progress Report. While the harvest progress itself has been generally positive, concerns have arisen regarding soybean yields due to a decline in crop conditions. Presently, 50% of the soybean crop is rated as being in good-to-excellent condition. This rating falls 2 p.p lower than trade estimates and represents a 5 p.p decrease from last year's levels.

As a result of these concerning developments, market expectations are leaning towards further reductions in the USDA's 2023/24 soybean crop estimates. The current estimates, as reported in September, stand at a four-year low of 112.8 million metric tonnes. This figure reflects a month-on-month decrease of 1.4% and a year-on-year decline of 3.0%.

Traders and analysts are eagerly awaiting the release of the US Quarterly Grain Stocks Report, scheduled for September 29th. There is a prevailing sentiment that US soybean stocks will decrease compared to the previous year, with trade estimates varying but generally ranging from 0.216 to 0.270 billion bushels. This is in stark contrast to last year's level of 0.274 billion bushels.

Despite the optimistic fundamentals surrounding the US soybean crop, certain factors have dampened upward price risks. These factors include technical selling and the anticipated surplus from South America. These elements have contributed to the limitation of price increases. Notably, the latest US export sales figures for soybeans and soybean oil have experienced significant declines. Soybean export sales have seen a stark 34.9% decline compared to year-ago levels, while soybean oil export sales have plummeted by a staggering 41.3%. These declines can be attributed to the presence of competitively priced Brazilian supply, which has redirected trade flows.

Consequently, the Chicago Board of Trade (CBOT) soybean and soybean oil futures prices for October 2023 have witnessed declines. As of September 26th, soybean futures prices fell by 0.97% week-on-week (w-o-w), reaching US cents 1,302.6 per 60 lbs bushel. Similarly, soybean oil futures prices declined by 4.7% w-o-w, settling at US cents 58.86 per pound. This combination of factors has contributed to the complex landscape surrounding soybean prices in the US market.