The soybean oil market is an interesting one. Soybean oil has many uses which is why it is among one of the top oils in the globe. Especially in the food and beverage industry, soybean oil is used extensively. It can be used for garnishing, frying, and baking. Apart from that, another use of the soybean oil is in the paint manufacturing process and in drying oil manufacturing process. Alkyd resins require soybean oils as one of the key raw materials. China is the largest consumer of soybean oil and it uses it in the food and beverage industry. The soybean oil has industrial applications too. The biodiesel industry has the use of soybean oil which means the demand can get higher.
According to the market intelligence report by Beroe, the soybean oil market size in China is 91.7 MMT while in North America the size of the market is 13.49 MMT. There has been continuous growth in the supply of soybean oil at a CAGR of over 5%. During the 2017 and 2018, the global supply of soybean oil was 69.5 MMT while the global consumption was 55.62 MMT. The global ending stocks stood at 3.2 MMT during that period. The key producing countries of soybean oil are China which produces 31% of soybean oil, the US which produces 19%, Brazil produces 15%, Argentina produces 14% while the EU accounts for 3% of the global production of soybean oil.
The key exporting countries of soybean oil are Argentina, Brazil, the US, the EU, and Paraguay. Argentina exports 44%, Brazil exports 14%, the US exports 10%, the EU exports 7%, while Paraguay exports 6%. The key consuming countries are China, the US, India, Brazil, and Argentina. They consume 31%, 17%, 12%, 9%, and 6% respectively. The key importing countries of soybean oil are India which imports 33%, Bangladesh imports 8%, China imports 4%, Morocco imports 5%, and Algeria imports 7%. Beroe’s market intelligence report states that emerging soybean oil market suppliers are Russia, India, and Bangladesh.
The weather is an important factor when it comes to production and can impact the soybean oil market. This is because although the planting areas of soybean are vast and many, the unfavorable weather can negatively affect the seed quality and production. During the 2017/2018 period, there was a shortage of rapeseed oils and palm oil. This helped the soybean oil market grow because the demand for soybean oil surged as a result. Moreover, the demand grew too which helped the market improve and increase as a result. The supply of soybean has steadily been increasing in regions where the weather has been favorable.
Soybean oil makes it to the list of the most consumed vegetable oils. It stands at the second most consumed vegetable oil in the world. The demand from Asia and the US is driving the soybean oil market growth. Globally, the demand in biodiesel also led to an increase in the demand for soybean oil. Beroe states that production in China is likely to increase in the future mainly due to an increase in consumption and the increase in China’s population. Moreover, the Chinese government initiatives have given a boost to the soybean oil market as production has been encouraged in China which means an increase in supply.
The main cost driver of the soybean oil is the soybean seed since it accounts for 65% of the total soybean oil production. If the soybean seed isn’t as readily available then the cost can be driven up. The US suppliers fix the contract structures and the soybean oil prices by using CBOT and other costs. To be more precise, the suppliers use the CBOT soybean oil futures along with the freight costs and basis. The basis and freight costs are added together with the CBOT futures. The difference between the futures prices and cash equals to basis which is used for calculation. Soybean oil price depends on the supply along with the margins as well.
Beroe states that soybean oil trends include an increase in the price of soybean oil in the US. For example, in the US, the prices of soybean oil went up in the first quarter of 2019. Since soybean oil is used in the biodiesel industry, the price increase is more likely to happen as the demand in that industry will increase. Similarly, in Brazil, the prices are likely to increase because of an increase in exports and demand from the biodiesel industry. Argentina is likely to see stable pricing of soybean oil although if an increase in price does occur, then it can be up to 2.5% in the future.