• Price Volatility Returns To The Soybean Complex

    May 04, 2018 5:02 PM

    On April 4, 2018, soybean futures quotes suffered a highly volatile day upon China’s announcement of import tariffs on U.S. soybeans. Soybean futures dropped over five percent in value before recovering about half that loss on the market.1 However, subsequent to the announcement, soybean futures recovered all of the immediate loss.

    This positive turn can be explained by three factors: the recent dialogue between Chinese and American officials, the demand of U.S. soy regardless to any trade war, and the weather-related reduction in the Argentine soybean crop.

    In the April USDA World Agricultural Supply and Demand Estimates (WASDE) update, USDA projected global soybean imports to be up five percent at more than 150 million metric tons.The U.S. is projected to produce 37 percent of soybeans supplied to the world. Brazil is expected to produce 48 percent, while the remaining 15 percent will be sourced from other origins. Tariffs on U.S. soybeans will not significantly affect the ultimate export number for domestic soybeans.

    Any negative impact on soybean values would tend to weigh most heavily on soybean oil values, since global soybean meal demand remains extremely robust in the developing world. As more soybean meal is used to feed livestock and poultry, oil surpluses develop.3 The latest WASDE update forecasted U.S. soybean oil stocks to be at a near 2 billion pounds in September 2018. 2 This would be the densest level in six years. USDA is forecasting 2017-18 soybean oil prices to average about 1 cent per pound, which is similar to its current level.

    References

    1. “CME Soybean Futures Quotes.” http://www.cmegroup.com/trading/agricultural/grain-and-oilseed/soybean_quotes_globex.html CME Group. April 11, 2018.
    2. “World Agricultural Supple Demand Estimates.” http://usda.mannlib.cornell.edu/usda/current/wasde/wasde-04-10-2018.pdf United States Department of Agriculture. April 10, 2018.
    3. “CME Soybean Oil Futures Quotes.” http://www.cmegroup.com/trading/agricultural/grain-and-oilseed/soybean-oil_quotes_globex.html CME Group. April 11, 2018.

  • USDA Sees Record Demand For Soybean Oil As Biodiesel Feedstock

    February 07, 2018 7:13 PM

    In late October, the U.S. Environmental Protection Agency’s (EPA) decided not to move forward with reducing the biomass-based diesel and advanced biofuel requirements after the organization received backlash from corn-state lawmakers who expressed concerns that the moves would undercut ethanol demand. 1 In the USDA’s December supply demand update (WASDE), demand for soybean oil during the current marketing year as biodiesel feedstock was raised from 7 billion pounds to 7.5 billion pounds, a record amount. 2

    The WASDE also showed reduced domestic usage of soybean oil of 300 million pounds, so the net increase in forecast usage is only 200 million pounds. This did not affect future prices subsequent to the report. The USDA’s forecast cash price for soybean oil during the marketing year is an unchanged 34.5c/lb., which is a 2c/lb. increase from 2016’s average price. There were no significant changes to the soybean and soybean meal supply and demand projections in this report.

    Expect the soybean oil price to display a soft tendency in the near term and to follow petroleum prices, longer term.

    References

    1. Jarrett Renshaw. “EPA Abandons Changes to U.S. Biofuel Program after Lawmaker Pressure.” Reuters. October 20, 2017. https://www.reuters.com/article/us-usa-biofuels/epa-abandons-changes-to-u-s-biofuel-program-after-lawmaker-pressure-idUSKBN1CP1IL
    2. “World Agricultural Supply Demand Estimates.” https://www.usda.gov/oce/commodity/wasde/latest.pdf United States Department of Agriculture. December 12, 2017.

  • Stakeholders React to EPA Biodiesel Program

    January 19, 2018 6:13 PM

    The October 2017 update focused on the Environmental Protection Agency’s (EPA) notification of reducing the biomass-based diesel and on the advanced biofuel volume requirements under the Renewable Fuel Standard. However, after numerous farm belt legislators were critical of this decision by EPA, the agency backed off those plans.1 In addition, the Commerce Department set higher-than-expected anti-dumping penalties against imported Argentine biodiesel.2

    On November 9, 2017, the USDA issued its latest crop production estimates. Soybean production was hardly affected. It changed to a new record of 4,425 million bushels.3 The monthly USDA “World Agricultural Supply Demand Estimates” maintained a large projection for soybean oil usage as biodiesel feedstock this year (7 billion pounds); consequently, soybean oil stocks did not approach burdensome levels.4 Prices are forecast to be about two cents per pound higher compared to last year.

    References

    1. Jarrett Renshaw. “EPA Abandons Changes to U.S. Biofuel Program after Lawmaker Pressure.” Reuters. October 20, 2017. https://www.reuters.com/article/us-usa-biofuels/epa-abandons-changes-to-u-s-biofuel-program-after-lawmaker-pressure-idUSKBN1CP1IL  
    2. Eric Walsh. “U.S. Sets Antidumping Duties on Argentine, Indonesian Biodiesel.” Reuters. October 23, 2017. https://www.reuters.com/article/us-usa-biodiesel/u-s-sets-antidumping-duties-on-argentine-indonesian-biodiesel-idUSKBN1CS2TT
    3. “Crop Production.”  https://www.usda.gov/nass/PUBS/TODAYRPT/crop0917.pdf United States Department of Agriculture. September 12, 2017.
    4. “World Agricultural Supply Demand Estimates. https://www.usda.gov/oce/commodity/wasde/latest.pdf United States Department of Agriculture. September 9, 2017.

     

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Richard GallowayAbout the Expert

Richard Galloway is president of Galloway and Associates, LLC, a business consulting firm serving domestic and foreign agricultural processing, vegetable oil refining, biodiesel and grain handling industries. Galloway is a consultant to the QUALISOY Board, a collaborative effort among the soybean industry to help market the development and availability of trait-enhanced soybean oils, including high oleic soybean oil. Read More...