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Ontario Grain Farmer Magazine is the flagship publication of Grain Farmers of Ontario and a source of information for our province’s grain farmers. 

Optimistic outlook for global soy oil

U.S. SOYBEAN EXPORT COUNCIL CONFERENCE

GROWING DEMAND FOR VEGETABLE OIL FOR USE IN BIODIESEL AND RENEWABLE DIESEL will drive demand for soybeans on the international market. That’s the key takeaway from David Mielke’s supply and demand outlook presentation at the August 2024 United States Soybean Export Council (USSEC) Soy Connext conference in San Fransisco, California.

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Mielke, director of OIL WORLD, a leading private authority for global research and market analyses for oilseeds, oil, fat, and feed industry, informed international conference attendees that, while the short-term outlook for soybeans remains shaky, he predicts the five-to-ten-year outlook to be strong due to increasing demand for soy oil.

INCREASING VALUE

“The value of soy oil is on the rise due to an increase in demand for biodiesel and renewable diesel,” says Mielke. Historically, soybean crush margins have been driven by the price of soy meal due to the relatively negligible cost of soy oil. But Mielke explains that the global market has seen a switch in the last 10–12 months as the value of soy oil has far exceeded the value of soy meal, changing the market dynamics for soybeans.

Mielke says we are heading towards a global deficit of vegetable oil, primarily driven by lower production of palm, rapeseed (including canola), and sunflower oils. This shift in vegetable oil production, combined with continued demand for biodiesel and renewable diesel, will directly drive the demand for soy oil.

Nicole Mackellar, market development manager with Soy Canada, attended the recent Soy Connext conference that saw more than 800 participants from 53 countries, including importers, brokers, distributors, end

users, farmers, and industry representatives. She heard Mielke report that he anticipates an increase of 17 million tonnes of soybeans crushed worldwide over the next year.

“Conference attendees were encouraged by the long-term outlook of soy value, but we are aware of the potential challenges posed by the surplus of soy meal resulting from increased crushing and the need to identify markets for this byproduct,” says Mackellar.

GLOBAL PRODUCTION AND STOCKS

The growth in demand for vegetable oil comes at a time when global soybean production is projected to hit an all-time high, Mielke explains. He projects that world soybean production will reach 420 million tonnes in 2024/2025, compared with 391 million tonnes one year ago and 320 million tonnes in 2014. This expected increase in production is largely being driven by higher than anticipated yields in Brazil, increases in Argentina production, and a record crop in the United States.

“As global soybean supplies continue to grow, demand prospects will remain shaky in the short term,” reminds Mielke, explaining that Chinese new crop purchases will remain a key swing factor to watch, especially with a recent increase in Chinese soybean imports that could lead to an accumulation of soybean stocks.

Mielke says the growth in world rapeseed oil and sunflower oil output over the past two years largely offset a slowdown in world palm oil output. However, this will not be the case in 2024, “creating a bullish supply scenario for vegetable oils in the next 12 months.”

“Insufficient growth in world supplies of used cooking oil (UCO), tallow, and other non-food feedstocks in the years ahead will keep dependence high on vegetable oil as a feedstock for biofuel production,” says Mielke.

EMERGING MARKETS

“Attending the conference has given us valuable insights into global market trends, helping Soy Canada to identify strategic activities required to promote and showcase the high-quality soybean products that Canada offers,” says Mackellar, who also learned that India is an emerging market to watch for, especially for soybean meal. Mielke reported that changing dietary habits in India is leading to higher consumption of meat products, particularly chicken, and these new markets will create opportunities for an increase in soy meal availability. He anticipates India will move from being a net exporter of soybeans to a net importer.

“The expected global rise in soy meal will come as a result of the increase in crushing to meet the projected demand for vegetable oil,” explains Mielke, noting that the current demand for vegetable oil is primarily driven by renewable diesel and sustainable aviation fuel.

Historically, use has been driven by government mandates, but if airlines and sustainable aviation fuel companies can convince consumers that by paying a premium, they can fly “green,” the market could see additional demand growth outside watch for, especially for soybean meal. Mielke reported that changing dietary habits in India is leading to higher consumption of meat products, particularly chicken, and these new markets will create opportunities for an increase in soy meal availability. He anticipates India will move from being a net exporter of soybeans to a net importer.

“The expected global rise in soy meal will come as a result of the increase in crushing to meet the projected demand for vegetable oil,” explains Mielke, noting that the current demand for vegetable oil is primarily driven by renewable diesel and sustainable aviation fuel.

Historically, use has been driven by government mandates, but if airlines and sustainable aviation fuel companies can convince consumers that by paying a premium, they can fly “green,” the market could see additional demand growth outside of government mandates. Mielke also notes that the ability to find markets for the expected increase in soy meal will be essential to meet the growing demand for soybean oil. “Connecting with global customers at the conference has been instrumental in deepening our understanding of emerging opportunities for Canadian soybeans,” says Mackellar. “Despite a bearish short-term outlook, ongoing demand for biodiesel, renewable diesel, and the expected rise in sustainable aviation fuel is creating new prospects in the global market and for the Canadian soybean industry.”

Grain Farmers of Ontario is a member of Soy Canada.

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