In Chicago, soybean oil futures are heading for their sixth consecutive decline, with September 2024 contracts down nearly 9%. This decline is also impacting the prices of rapeseed and soybeans, reports CRM Agri.
A recent federal appeals court decision has allowed small oil refiners to bypass biofuel blending mandates under the US Renewable Fuels Standard (RFS), potentially reducing demand for soybean oil—a key ingredient in renewable diesel (RD) and sustainable aviation fuel (SAF), they note.
“The potential dent to demand in a key industry for soybean oil consumption has undermined soybeans too, which for September-24 shed 1.8% in lunchtime deals in Chicago [on Tuesday], returning close to three-year lows.
“An extension of rainfall in the Midwest weather outlook for the next week, and an easing in expectations for extreme temperatures, also undermined prices, as did further unease over the apparent lack of Chinese soybean import orders from the US for 2024/25. Many in the market fear that Chinese buyers are sidelining US soybeans in favour of Brazilian origin for fear of a return of Donald Trump as US president, who, in his first term in office, kicked off a trade war between the two countries.”
The impact of these developments on the construction of new US soybean processing facilities remains uncertain, US soy industry consultant, Gordon Denny, tells FeedNavigator.
US soy crush builds
Two new soy crush plants became operational last year, with another starting this year and five more expected by the end of 2024, followed by two more in 2025, he reports.
These facility expansion projects are driven by increasing demand for RD and SAF. However, Denny believes it will be challenging for US processors to sell an additional 10 million metric tons (MMT) of soybean meal, a 20% increase from current levels, particulary with the expansion of canola.
The market is currently driven by policies and politics rather than traditional supply and demand factors, influenced heavily by RD, SAF, and the EPA’s Renewable Identification Numbers (RINs) program, maintains the consultant.
However, the projections and economic models, particularly those from Argonne, which are used widely in the industry, are under scrutiny for accuracy, according to Denny. He and some experts believe that alternative models should be considered, as imports of used cooking oil (UCO), canola oil, and tallow are affecting the soybean oil market.
The US market is also influenced by subsidies, mandates, tax credits, and tariff protections, creating a complex economic landscape, he argues.
Meanwhile, the oil industry, with its significant resources and political connections, continues to play a major role. This situation is challenging for farmers, some of whom are struggling, while US soybean processors are seeing strong profits, with market inverses continuing unexpectedly, comments Denny.
