U.S. soybean oil prices at the Gulf peaked at nearly $500/ton above South American port quotes in mid- June but fell precipitously in July and August. However, premiums have risen again in recent weeks and currently stand near $90/ton. While this is well above the previous 4-year average of $12/ton, it does put the premium near levels observed in March.
Much of the rise in U.S. soybean oil Gulf prices relative to those in South America was rooted in expected dramatic growth in demand from planned renewable diesel plants. U.S. supplies were already tight and required demand rationing via higher prices to get expected demand in line with anticipated supply.
At nearly $500/ton, the premium for U.S. soybean oil was unsustainable and had the desired effect of reducing export and biofuel demand. Though premiums have declined substantially, prices at the Gulf remain elevated near $1,450/ton. This is roughly $400/ton above the level seen at the beginning of the year and nearly double the 4-year average Gulf price observed between 2017 and 2020.
Reductions in global sunflowerseed and palm oil production last year contributed to higher prices in all oils in late 2020. In 2021, rising energy prices, demand for biofuels, growing global food oil demand, and lower rapeseed supplies in Canada have all combined to push vegetable oil prices higher.
For the U.S. domestic market, the reduced supplies and higher prices for Canadian rapeseed oil will likely continue to support current soybean oil prices and premiums over South American-sourced oil in the coming year.
USDA currently forecasts soybean oil export volume in 2021/22 at roughly half the level observed in 2019/20 when U.S. soybean oil was selling at a discount to South American origin. In the first few months of 2021, soybean oil export volume declined on rising premiums.
As a result, U.S. exports during the June-August period were down 70 percent from a year earlier. U.S. soybean oil imports also rose in line with the increasing premiums, with August import volume exceeding exports for the first time in many years.
If recent history is a guide, current premiums would translate into minimal declines in exports to Canada and Mexico due to logistical efficiencies and well-developed supplier relationships. Other nearby markets could be down 50 percent with remaining markets down 70 percent.
U.S. Soybean Exports to Turkey Set to Grow in 2021/22 on Newly Approved Biotech Events
Between 2015/16 and 2017/18, the United States accounted for nearly 15 percent of Turkey soybean imports. However, between 2018 and 2020, no new biotech soybean events were approved by Turkey, leading to a drastic and sustained dip in imports of U.S. soybeans. As a result, the United States only accounted for about 1 percent of Turkey soybean imports over the following 3 marketing years.
Grain News on AgFax
Conversely, U.S. soybeans are well-positioned for growth to Turkey in 2021/22. According to U.S. Export Sales data through September 30, 2021, outstanding sales of U.S. soybeans to Turkey in 2021/22 were 170,000 tons, almost double total exports during the previous 3 marketing years combined.
This spike in sales is a direct result of the Turkish government’s approval of six new soybean biotech events in early 2021, likely an effort to help relieve high feed costs for the domestic poultry industry. In addition to the meteoric rise in global soybean and corn prices throughout late 2020 and early 2021, the value of the Turkish lira has dropped to record lows.
Over the past 5 years, the lira has lost about two-thirds of its value versus the U.S. dollar and 40 percent versus the Brazilian real. The weak lira makes feed even more costly for the Turkish poultry industry as feed accounts for about 80 percent of total expenditures and the sector is reliant on imports of feedstuffs to meet demand.
With climbing costs and growing domestic and export demand for poultry, Turkey soybean importers will likely turn to the 2021/22 U.S. soybean harvest as it begins to be marketed this month. Typically, the U.S. crop is priced more competitively than South American soybeans until that crop is harvested and marketed early the following year.