Global Oilseed Prices Soar! Concerns Grow for U.S. Soybean Export Prospects

Global oilseed prices strengthened in the week ended November 8, 2024, led by a strong rally in the vegetable oil market. Although Trump's re-election as president of the United States raises concerns about future trade wars, short-term demand is likely to remain strong until he takes office in January next year, and the impact of a potential tariff war on U.S. agricultural exports may not be felt until next summer; The US may restrict the import of waste cooking oil in the future, boosting Chicago soyoil surge; Sentiment was also buoyed by a sharp reduction in US soyabean yields and production by the US Department of Agriculture. But the prospect of a bumper South American crop continues to be the main factor weighing on oilseed prices. Going forward, markets will continue to keep a close eye on South American weather and U.S. trade and tariff policies that could disrupt global agricultural trade.

On Friday, November 8, the Chicago Board of Trade (CBOT) January soybean contract closed at $10.3025 per bushel, up 3.7% from the previous week. The average price for U.S. Gulf Coast soybeans shipped in November was $11.2275 per bushel, up 3.0%; The December soybean meal futures contract closed at $296.2 a short ton, up 0.3%; The December soybean oil contract closed at 48.77 cents a pound, up 5.3%; Euronext's February rapeseed futures contract closed at €536.50 a tonne, up 3.8%; The ICE January canola contract closed at C $665.1 a tonne, up 3.0%; The FOB spot price of Argentina's Upper River soybeans is $428 per ton (including 33% export tax), an increase of 3.6%. On the same day, the ICE Dollar Index closed at 104.89, up 0.7% from the previous week.

In its November supply and demand report, the USDA said the 2024/25 U.S. soybean yield is expected to be 51.7 bushels per acre, down 1.4 bushels from the record yield of 53.1 bushels forecast last month. This is the second consecutive month that the US soybean yield forecast has been lowered, mainly due to unusually dry weather in the Midwest during the growing season. Iowa soybean yields were cut by 3 bushels, while Illinois, Minnesota and South Dakota were all cut by about 2 bushels. This month's US yield cut was bigger than expected, and while still higher than last year's 50.6 bushels, it was down from 52.1 bushels in 2016/17, making it the second-highest yield on record.

U.S. soybean production in 2024/25 is expected to be 4.461 billion bushels, down 121 million bushels from the record 4.582 billion bushels forecast last month. Although up nearly 300 million bushels, or 7.2 percent, from the previous year, it was below the all-time peak of 4.465 billion bushels in 2021/22. Acreage harvested remained unchanged at 86.3 million acres, up from 82.4 million acres in the previous year.

This month the USDA cut US soybean demand by 40 million bushels (15 million bushels for crushing and 25 million bushels for exports) as a result of lower production, forecasting exports at 1.825 billion bushels (1.695 billion bushels in the previous year). Crush volume was 2.410 billion bushels (previous year: 2.287 billion bushels); Ending inventories were revised down by 80 million bushels to 470 million bushels, a 37.5 percent year-over-year increase to the highest inventory level in five years and the fifth highest inventory level in the last 60 years. U.S. soybean stocks-to-use ratio reached 10.8% in 2024/25, down from 12.5% forecast last month, up from 8.3% in 2023/24, the highest level in five years and above the 10-year average of 9.1%. This indicates a relatively loose soybean supply situation for the next year, so soybean prices need to remain competitive to avoid further inventory expansion. Usda expects the annual average price of soybeans for 2024/25 to be $10.80 per bushel, unchanged from last month and down from $12.40 last year.

The USDA this month cut its 2024/25 global soyabean production forecast by 3.5 million tonnes to 425.4 million tonnes, still a record and up 30.7 million tonnes or 7.8 per cent from a year earlier, after forecasting 8.7 per cent growth last month. Among them, production in the three South American countries is expected to reach a record 231.2 million tons, an increase of 18.99 million tons or 8.9%, compared with the 19.1 million tons or 9.0% forecast last month, mainly due to the upward revision of Argentine orange bean production by 110,000 tons this month.

Global soybean exports are expected to rise to 181.71 million tons, an increase of 180,000 tons. The press volume was lowered to 346.15 million tons, a decrease of 230,000 tons.

This month's forecast for 2024/25 world ending soybean stocks was lowered to 131.74 million tonnes, down 2.9 million tonnes from the same period last year, but up 19.32 million tonnes, or 17.2%. Year-on-year growth was down from 19.8 per cent compared with last month's forecast.

The global soybean stocks-to-use ratio is expected to reach 22.56%, lower than the 23.05% forecast last month, but still higher than the 20.03% and 10-year average of 19.25% this time last year, the highest level since 2018/19 and the second highest in nearly six decades.

Trump's victory in the presidential election has created even greater uncertainty for the soybean industry.

Donald Trump has won a second term as president of the United States, defeating Democratic candidate Hillary Clinton in the presidential election. This result heralds higher uncertainty for the U.S. and global oilseed markets.

Market analysts expect that Trump's economic policy proposals could lead to inflationary pressures in the United States, prompting the Federal Reserve to slow or even reverse the pace of interest rate cuts, and boost the value of the dollar against other currencies.

At the same time, there are concerns that Trump's protectionist trade policies could spark a trade war with China and that tensions with other important trading partners, such as Mexico, could escalate. Trump has said that once in office, he will impose a 60 percent tariff on Chinese products and a 10 percent tariff on imports from other countries. That concern, coupled with US soyabean prices near four-year lows, has prompted a recent boom in US soyabean sales. In the eight weeks to October 24, cumulative US soybean sales reached 13.5 million tons, of which 52 percent went to China. However, analysts point out that the implementation of tariffs will not happen overnight. During Mr. Trump's last term, there was a six-month gap between threatening tariffs on China and actually implementing them. So even if Trump imposes tariffs again, the impact is more likely to hit next year's crop exports.

Trump's "America First" policy could also lead to restrictions on imports of used cooking oil. After the Biden administration introduced the inflation reduction Act, the United States imported a lot of low-carbon biofuel raw materials, mainly used cooking oil and animal fat. China is a major supplier of used cooking oil. Because soybean oil does not reduce carbon emissions by more than 50 percent, its use in the U.S. biofuel industry is restricted, causing soybean oil futures prices to fall sharply in the early months of the year. Expectations that the new US administration will restrict imports of used cooking oil have helped boost demand for domestic soyoil, underpinning a strong rebound in soyoil futures prices.

Finally, Trump has said he will seek to increase U.S. crude oil production to lower oil prices, which could reduce the competitiveness of biofuels and demand for raw materials such as soybeans. However, Trump has also said he intends to encourage the production of biofuels, so it is difficult to judge the industry's prospects for the next few years.

Soyoil prices in Chicago and palm oil in Malaysia have both risen strongly over the past week, marking the third straight week of soaring prices. In the three weeks from October 22 to November 8, the price of soybean oil futures in Chicago rose nearly 7 cents per pound, or 16.6%. The recent sharp rise in soybean oil futures prices is partly due to market expectations that after Trump's re-election as president of the United States, he may adopt an "America first" trade policy, restricting or even banning the import of waste cooking oil from China, thereby promoting the United States biofuel industry to increase the consumption of domestic soybean oil and canola oil.

Over the past three weeks, Malaysian palm oil futures prices have risen significantly, reaching RM845 per tonne or a 19.9% increase, hitting their highest since June 17, 2022 on Friday. This rally is mainly due to strong demand from the biofuel sector, especially Indonesia's planned launch of B40 biofuel next year, which is expected to add an additional 3 million tonnes of crude palm oil demand. In addition, production growth in major palm oil producing countries was limited due to factors such as unfavorable weather conditions and aging of oil palm trees. At the same time, the reduction in the global supply of sunflower and canola oil has also exerted upward pressure on prices.

According to the monthly price report of the Food and Agriculture Organization of the United Nations (FAO), the global vegetable oil price sub-index reached an average of 152.7 points in October, up 7.3% from September and hitting a two-year high. The increase was attributed to an across-the-board increase in the prices of palm oil, soybean oil, sunflower oil and canola oil. Global palm oil prices rose for a fifth straight month in October, mainly on concerns about lower-than-expected production and an expected seasonal decline in key Southeast Asian producers. Global sunflower and rapeseed oil prices continue to rise due to lower production expectations for 2024/25. Global soybean oil prices have risen due to the limited supply of alternative vegetable oils while global demand has remained strong.

The U.S. Department of Agriculture's weekly Crop Progress report showed that as of Nov. 3, the U.S. soybean harvest was 94 percent complete, up from 89 percent the previous week and unchanged from a year ago, but below the five-year average of 85 percent. The U.S. weather agency is predicting light rain across much of the Midwest over the next few days.

Us soybean export sales performed well last week, but their sustainability remains to be seen. Since Trump repeatedly proposed a 10 percent tariff on all imports and a 60 percent tariff on Chinese goods during his campaign, markets are wary of fears that this could lead to retaliatory measures by importing countries to reduce their purchases of U.S. agricultural products, as was the result of Trump's trade war with China during his last term. In addition, Chicago soybean futures are near four-year lows, triggering a strong wave of U.S. soybean sales. After Donald Trump's victory in the US election this week, the impact on demand for US soybean exports is likely to be complicated. Buyers are likely to continue buying US soyabeans during the two-month gap before Mr Trump's inauguration in January; If the outlook for Brazilian soyabean production remains positive early next year, the intensity of such defensive purchases could taper off.

The US Department of Agriculture's weekly export sales report showed net US soybean sales of 2.04 million tonnes for the week ended October 31, down 10 per cent from the previous week but 10 per cent above the four-week average. Total U.S. soybean sales for the 2024/25 year to date are approximately 28.3 million tons, up 16.7% year over year; In contrast, the USDA expects full-year exports of 49.67 million tons, up 7.7 percent from a year earlier. It is worth noting that total U.S. soybean sales were equal to 57% of the USDA's export target, but below the historical average of 60% for the same period.

Based on price quotes, U.S. soybeans are currently the cheapest supply available on the global market. On November 7, the US Gulf soybean price was $421 / ton, up $8 from a week ago. Brazilian soybeans are quoted at $440 / ton at the port of Paranagua, up $13; Argentine soybeans are quoted at $428 / ton, up $16.

According to customs data, China imported 8.09 million tonnes of soyabeans in October, down 29 per cent from the previous month but up 56 per cent from a year earlier and the highest for the same period in four years. In the first 10 months of 2024, China's total soybean imports reached 89.936 million tons, up 11.2 percent year on year. Given that Chinese buyers are likely to continue restocking before Trump returns to the White House in January, soybean imports in the last two months of the year are expected to remain strong, and China's soybean imports this year are likely to break the historical import record of 100.31 million tons in 2020.

While the pace of US soybean sales to China has been strong in recent weeks, the overall pace of US sales to China has been sluggish so far this year. As of October 31, total U.S. soybean sales to China (shipped and unshipped sales) were 11.13 million tons, down 2.9% from a year ago and the lowest in 16 years (excluding data from the 2018-19 Sino-U.S. trade war). This year, Chinese purchases accounted for just 44 percent of total U.S. soybean sales, the lowest share in 18 years (excluding trade war years). This may reflect that since the 2018 trade war, as Brazil's exports to China have gradually increased, China has significantly reduced its dependence on U.S. soybeans, which also indicates that even if the tariff war breaks out again next year, it is unlikely to repeat the scenario of 2018, of course, it also depends on whether the prospects for soybean production in South America, which is currently being sown, remain positive.

With widespread rainfall in the central and western regions of Brazil, soybean sowing in the country has accelerated significantly. AgRural, a consultancy, reports that soyabean planting is not only ahead of this time last year, it is also at the second-highest level on record. As of October 31, Brazil's 2024/25 soybean sowing schedule had reached 54%, up from 36% the previous week and up from 51% in the same period last year. In just two weeks, Brazilian farmers have sown nearly 17 million hectares of soybeans, and the current planting schedule is only 60% behind the same period in 2018/19.

AgRural expects Brazil's soybean production to reach a record 169.3 million tonnes in 2024/25. StoneX this week also raised its 2024/25 Brazilian soybean production forecast to 166.2 million tonnes, 0.7 percent higher than its previous estimate. In contrast, Brazil's National Commodity Supply Company (CONAB) now expects Brazilian soybean production of 166 million tons in 2024/25, up 12.7 percent from the previous year.

In Argentina, the Buenos Aires Grain Exchange forecast heavy rainfall in the northern agricultural region of the country next week, which will facilitate soybean planting. The exchange said on Thursday that as of November 6, Argentina's 2024/25 soybean sowing progress was 7.9 percent, up nearly 5 percent from the previous week and 1.8 percent from the same period last year.

With the US soybean harvest coming to an end, the market will be closely watching the rainfall in South America and soybean planting and growth conditions, especially the possible impact of La Nina. Unless the production outlook changes as a result of worsening weather conditions in South America, the significant pressure on global soybean supplies will continue to dampen the operating trend of soybean prices.