The average price of soybean oil fell to a 19-month low of 31.6 cents per pound last month, according to a new report from the United States Department of Agriculture.
The report, Oil Crops Outlook from the department’s Economic Research Service, attributed the fall to the big reduction in petroleum prices, which has reduced demand for soybean oil for the production of biodiesel.
Domestic use of soybean oil during 2009/09 was forecast to fall by 100m pounds to 18bn pounds.
While this could work in favour of food formulators, the report also noted that plentiful global supplies of oilseeds and vegetable oils in 2008/09 is another factor in the downward price story or soybean oil. Bigger harvests of oilseed crops in India, China and elsewhere have lowered demand for imports of vegetable oils in general.
Global vegetable oil
Soybean oil is likely to lose market share to palm oil, sunflower seed oil and rapeseed oil, according to the report’s authors. They forecast that soybean oil will account for 19 per cent of global vegetable oil exports in 2008/09 compared with 21 per cent last year.
Increased supplies of other oils, such as canola oil, are depressing soybean oil prices in the United States. Imports of canola oil are forecast to reach 2.55bn pounds in 2008/09; up 14 per cent compared with last year and twice as high as five years ago.
Meanwhile, the US soybean crush is forecast fall by 30m bushels in December to 1.715bn reflecting lower domestic consumption.But the report predicts that US soy bean exports will rise by 30m bushels to 1.05b meaning that 2008/09 ending stocks are expected to remain unchanged at 205bn bushels.
Thanks to a better than expected harvest, Canadian production of canola is expected to reach 12.6m tons, up 1.7m tons on previous estimates, according to the report. A record area of good quality seed was harvested in each of the prairie provinces with record yields in Manitoba and Saskatchewan.