Global oilseed market: soybean oil prices all the way rainbow, boost oilseed prices rise

Global oilseed prices surged in the week to 4 November 2022, buoyed mainly by a surge in soyoil futures, as uncertainty over the continuity of exports from the Black Sea added to market volatility and La Nina weather remained a potential threat to South American soyabean seeding and production prospects. At the same time, expectations of a slower pace of Fed rate hikes and gains across equity and commodity markets also reflect a return to investor risk appetite.

The Chicago Board of Trade's January 2023 soybean contract closed Friday at $14.6225 a bushel, up 4.4 percent from a week ago. The average price of the first yellow soybean spot for November shipping in the U.S. Gulf was $16.715 per bushel, up 6.1 percent from a week ago. CBOT's December soybean meal reported $420.40 a short ton, down 1.2 percent from a week ago. December soybean oil settled at 77.17 cents a pound, up 7.5 percent from a week earlier. Euronext's February 2023 futures traded at 664.75 euros a tonne, up 4.1 percent from a week earlier. ICE January rapeseed traded at C $898.40 / ton, up 4.0% from a week ago; Argentina's FOB spot price for Shanghe soybeans is $614 per ton (including 33% export tax), up 3.4% from a week ago. The ICE Dollar Index DXY, + 0.15% closed Friday at 110.774, up 0.15% from a week ago.

This week international crude oil futures rose for the third week in a row. The dollar tumbled and equities rallied amid uncertainty about future Fed rate rises, signalling improved risk appetite among investors; Oil prices were also supported by looming European Union sanctions on Russian crude and a vaguely positive outlook for Chinese demand. The December contract for West Texas Intermediate crude on the New York Mercantile Exchange settled at $92.61 a barrel, up 5.4 per cent from a week ago. January Brent crude futures, the global benchmark, traded at $98.57 a barrel, up 5.1 percent from a week ago.

The Fed raised rates on schedule by 75 basis points, and may slow the pace of future rate increases

The Federal Reserve on Wednesday raised interest rates for the fourth time in a row by three-quarters of a percentage point, taking its benchmark rate to a target range of 3.75 percent to 4 percent. Fed Chairman Jerome Powell has indicated that the pace of each rate hike is likely to be reduced in the future, but that it will eventually raise borrowing costs to a higher level than the previous forecast of 4.6%. U.S. non-farm payrolls report on Friday showed job growth slowdown in the pace, rising unemployment, suggests that the Labour market tensions eased, this would also help to consolidate the market on the fed from December hope of turning to smaller increases in interest rates, which led to a 1.8% slump in the dollar on Friday, from gold to the base metal, from soft commodities to grain and oilseed futures, have a strong rising trend. Global stock markets also posted strong gains, with emerging market indices Posting a 5 per cent weekly gain, their best weekly gain in more than two years, also on hopes of easing restrictions in China and optimism surrounding US-China relations.

Extremely tight U.S. diesel supplies and low soyoil inventories have supported a five-month high in soyoil prices

In the past week, soyoil futures in Chicago have led the way, hitting a five-month high and deserveably becoming the leading commodity in agricultural futures. So far this year, Chicago soyoil is up 40.3 per cent, compared with 15.2 per cent for soyabeans and 10.6 per cent for soymeal. Canadian canola futures rose 16.4 per cent, while Malaysian palm oil futures fell 7.1 per cent. Soyoil's strength has been linked to strong demand for biofuels in the US.

High US soyoil prices are linked to the current exceptionally tight US diesel inventories. In fact, U.S. diesel supplies are at their lowest point in history. Although gasoline prices have fallen recently in the United States, diesel prices remain high. The average U.S. retail price for a gallon of diesel is more than $1.50 higher than the retail price for a gallon of regular unleaded gasoline, according to GasBuddy. U.S. diesel prices rose more than 8% in October, while gasoline prices were unchanged. The EIA reported this week that the average U.S. diesel price was $5.32 a gallon, up $1.59 from a year earlier. The latest diesel price rise has been spurred by shortages both globally and in the United States, where inventories are particularly low. In New England, which is in the northeast, diesel is in short supply because the New England states have the highest concentration of homes that use heating oil. U.S. supplies of distillates, which include diesel and heating oil, were 106.8 million barrels in the week ended Oct. 28, 19 percent below the five-year average and the lowest for this time of year since data began in 1982. As the U.S. government has tried to move away from fossil fuels in recent years, refineries have shut down capacity; Tight global natural gas supplies and soaring prices since last year have prompted a shift from natural gas to distillates as feedstock for power plants, boosting demand for the latter. So while the U.S. government has sold nearly 200 million barrels of its strategic crude reserve this year, and supplies of crude oil and gasoline have improved, supplies of diesel, heating oil, jet fuel and kerosene have been noticeably tight, with prices of $150 to $200 a barrel versus about $90 a barrel for crude. Current U.S. distillate demand is about 5.4 million barrels a day and domestic inventories are about 106 million barrels a day, equivalent to only 19 days of demand. Around the world, diesel stocks are the tightest they have been in decades. The three main diesel storage centres outside China -- the US, Europe's Amsterdam-Rotterdam-Antwerp hub and Singapore -- have a combined 132m barrels of diesel, compared with a 10-year average of 174m barrels. At the same time, demand is relatively strong and inelastic because even in a recession, people need to buy groceries and receive delivery from Amazon, all of which is carried by diesel. With winter approaching, diesel is in short supply and prices are high, prompting traders to raise pricing expectations for alternative fuels, including soyabean oil-based B100 diesel.

Us soyoil inventories are at a 23-month low

U.S. soybean oil inventories stood at 1.999 billion pounds at the end of September, down from 2.103 billion pounds at the end of August and 2.231 billion pounds at the end of September last year, the lowest level in 23 months, according to the USDA's monthly crushing data released Tuesday.

U.S. biofuel capacity reached 21.37 billion gallons in August, down from 21.469 billion gallons in July but up from 20.853 billion gallons in August 2021, according to data released Monday by the U.S. Energy Information Administration (EIA). Renewable diesel production increased, while ethanol and biodiesel production declined slightly.

Renewable diesel capacity reached 2.134 billion gallons in August, up from 2.089 billion gallons in July and 1.014 billion gallons in August last year. Biodiesel capacity was 2.084 billion gallons in August, down from 2.089 billion gallons in July and 2.431 billion gallons in August last year. U.S. use of soybean oil for biofuels reached 925 million pounds in August, down from 956 million pounds in July but up from 823 million pounds in August last year. Canola oil use was 132 million pounds, unchanged from July and down from 142 million pounds in August last year.

Surging demand from the US renewable diesel industry could lead to a future surge in US soyabean export premiums

Given the outlook for US renewable diesel demand, US soyoil demand will increasingly shift towards localisation, squeezing export supply, and even the possibility of US soyabeans being exclusively consumed domestically cannot be ruled out in the future.

The recent surge in investment in U.S. renewable diesel capacity, with new soybean crushing and refineries to be built in the next two years, will increase U.S. renewable diesel production capacity to 6.5 billion gallons by 2030, according to a report released in early October by the U.S. agricultural cooperative bank CoBank. Soybean oil is the most common feedstock for the production of renewable diesel. U.S. soybean acreage will need to increase by 17.9 million acres to fill the supply gap from renewable diesel production, CoBank said.

The US renewable diesel boom could halt US soyabean exports by 2030, according to new forecasts from CoBank. U.S. renewable diesel production capacity is expected to reach 24.6 billion liters in 2030, up from 5.7 billion liters in 2022. Kenneth Zuckerberg, an analyst at the bank, says meeting that target would mean the United States would have to crush an additional 3.4 billion pups of soybeans. That's a staggering crush figure considering the current U.S. soybean production stands at 4.5 billion bushels. To meet that demand, the U.S. would need to stop exporting soybeans and plant 17.9 million more acres of soybeans, up 21 percent from 2022. Looking ahead to 2030, corn fields will be the main source of additional soybean acreage, especially if the spread of electric vehicles eventually leads to a decline in demand for corn ethanol. Under this scenario, soybeans would account for 38 percent of U.S. agricultural land, up from 31 percent today, while corn's share would shrink from 29 percent to 27 percent. Ways to prevent the conversion of large amounts of corn fields to soybeans include large-scale planting of rapeseed and sunflower seeds, increasing imports of other vegetable oils, or using other raw materials such as tallow to produce renewable diesel fuel, CoBank said.

While Cobank's prediction that U.S. soybean exports could be completely shut down is too alarming, one direction the report suggests that the industry should take seriously is that competition for U.S. farmland will intensify as more renewable diesel plants come online in the U.S. While the United States will not stop soybean exports altogether, buyers are likely to have to pay a premium to compete with buyers of renewable diesel for limited supplies. That may be part of the reason why China recently announced plans to cut back on soybean meal consumption. Meanwhile, pressing demand for alternative oilseeds such as rapeseed is expected to rise. The Canadian canola industry seems to agree, with the Canadian Oilseed Processors Association (COPA) forecasting that canola crushing capacity will increase by 5.7 million tonnes to 16.8 million tonnes by 2025/26; By 2030, the North American biofuel industry will consume 6.5 million tons of canola, up from 1.8 million tons in 2020.

The US soybean harvest is nearing its end and the export outlook is uncertain

As of Oct. 30, the U.S. soybean harvest was 88% ahead of schedule, compared with 78% at this time last year and a five-year average of 78%.

For the week ended Oct. 27, net U.S.soybean sales for 202/23 were 830,000 tons, down from 1.03 million tons a week earlier; That included net sales of 750,000 tonnes to China, down from 1.12 million tonnes last week and 1.21 million tonnes a year earlier.

Total US soybean export sales (both shipped and unshipped) for 202/23 so far were 32.3 million tonnes, up 0.9 per cent from a year earlier, compared with a 4.7 per cent increase the previous week. Of that, sales to China rose 7.2 percent to 18.49 million tons, compared with a 10.6 percent increase in the previous week.

The USDA expects U.S. soybean exports to be 55.66 million tons in 2020/23, down 5.23 percent from the previous year. In contrast, U.S. soybean exports in 2021/22 fell 4.77 percent year on year.

With low water levels in the Mississippi River blocking the most efficient route to get U.S. soybeans to the Gulf Coast export hub, traders are looking to alternative export routes from Puget Sound to Texas and the Great Lakes. More than half of the soybeans exported by the United States are typically shipped down the Mississippi River from the American Bay docks and across the ocean. But a prolonged lack of rainfall in the Midwest has reduced water levels in this major artery of the inland river, and barge costs have soared to record levels, prompting traders to switch to Southeast Texas ports for soybean exports. Typically, these ports handle less than 5 percent of exported soybeans. Mike Sternhawk, executive director of the American Soybean Transportation Alliance, says the logistics situation is getting worse. A lot of people are looking for alternatives.

At the same time, China's soybean import demand is likely to grow because of low domestic inventories. China's commercial soybean stocks fell to 3.64 million tons at the end of October, down 38% from the five-year average, mainly due to insufficient purchases due to low crushing margins or losses earlier in the year, while low water levels in the Mississippi River slowed shipments of U.S. soybean exports since October. Arlan Sudeman, chief analyst at StoneX, thinks China will need to restock soyabeans at some point. China may choose to buy cheaper Brazilian soyabeans if they produce record levels as expected.

Us soybean crush demand

The U.S. soybean crush in September 2022 was 168 million bushtails (5.03 million short tons), down 4% from the previous month and the lowest monthly crush in 12 months, but up 2% from 164.1 million bushtails a year earlier, according to monthly crushing data released Tuesday by the U.S. Department of Agriculture. By comparison, data from the National Oilseed Processors Association (NOPA) show that its member companies crushed 158.109 million bustons of soybeans in September, down 4.5 percent from August but up 2.8 percent from September 2021. A seasonal slowdown in crushing is expected as September is a slow month for US soybeans. Given the high US soyabean crushing margins, a strong rebound in October soyabean crushing is likely.

Brazil is in turmoil and the weather is threatening the soya planting

In Brazil's presidential election at the end of October, leftist former President Luiz Inacio Lula da Silva narrowly defeated far-right incumbent Jair Bolsonaro. Supporters of the latter have held mass demonstrations across the country since 30 October, blocking roads, blocking the main access to the port of Palanagua, the second largest, and even marching to military camps to demand the army take over, which has disrupted fuel distribution, meat production and shipments of agricultural exports.

At present Brazil soybean sowing progress is about half, the yield outlook is generally good. StoneX this week raised its 2020/23 Brazilian soyabean production estimate to 154.35 million tonnes from a previous estimate of 153.8 million tonnes due to an upward revision of acreage in some states and favourable weather conditions. But StoneX has cut its 202/23 soyabya export forecast to 96m tonnes, down 4m tonnes from an earlier forecast of 100m tonnes, given concerns about demand from top buyer China.

However, analysts at HedgePoint warned that Brazilian soyabeans production for the 2020/2023 crop year could fall below 150m tonnes due to the La Nina weather phenomenon. La Nina conditions, which tend to lead to drought in southern Brazil, will be active between December and January.

China plans to import Brazilian soybean meal

China is ready to import soybean meal from Brazil to diversify its supply and ease a recent shortage. Brazil has sent a list of companies that can export soybean meal to China, the country's agriculture Ministry said on Nov. 2. At least 30 companies have applied to export to China and 14 have been approved.

Brazil has exported 17.7 million tons of soymeal in the first 10 months of this year, surpassing the 16.8 million tons it exported for the whole of 2021, according to the National Association of Grain Exporters (ANEC). In October, soybean meal exports reached