The market for biofuels will continue to be a trigger for the price of soybean oil this year, according to analysts from market agency IndexBox. The average export price is expected to rise by 4%. Not only the high demand for biofuels plays a role, but also the lower soy yields in Brazil and Argentina have an effect.
Due to challenging weather conditions, such as drought and frost, in the major grain-producing countries, the supply of agricultural commodities is limited. The United States Department of Agriculture (USDAFor example, Brazil expects a soybean yield of around 134 million tons. That is 7% less than expected in November and the lowest level in six years. The Argentine soybean harvest is also estimated to be 2% lower. Global final stocks are therefore just under 100 million tons. A challenge, because the demand for soy-related products is high. Soy oil in particular is in demand, including for the production of biofuels.
Growing trade in soy oil
In 2020, overseas soybean oil purchases increased by 7,5% to 13 million tons. This is evident from new figures from the market agency IndexBox. This is the second increase in a row, after three years of decline. In value terms, imports increased to approximately $10,3 billion. India is the largest buyer, with a volume of 3,7 million tonnes worth $3 billion. The country accounts for 28% of the total. India is persistently focusing on the production of ethanol and biofuels. A lot of sugar cane today also gets that destination. Something that affects the global sugar market. China follows in second place, with a volume of 963.000 tons worth $725 million. However, that country is purchasing fewer and fewer soybeans.
Argentina is the main supplier of soybean oil, with an export volume of 5,3 million tons. The export value is no less than $3,7 billion. This gives the country a market share of 39%. The United States (1,2 million tons) and Brazil (1,1 million tons) follow at a great distance. In any case, smaller harvests in these three countries will have an effect on the world trade of soy oil. For example, the average export price rose by 65% last year to $1.385 per tonne, reports IndexBox. High freight rates also contribute to the increased price.
Further price increases expected
On Friday, January 14, the CBoT quote for soybean oil closed at $13,57 per bushel. That is a comparable level to last year; then the quote during this period was about $14 per bushel. Two years ago the price during this period was about $9,30 per bushel. And the rise is not over yet, say analysts at IndexBox. An average export price of $1.425 per tonne is expected this year. That is an increase of 4% compared to the past year. The rising demand for biofuels, especially from Asia, will be the main driver behind this increase.