USDA Oilseeds: World Markets and Trade (Oct. 12): U.S. Soybean Oil Premiums Evaporate on Lower Demand

Washington, DC — 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, according to the Oct. 12 Oilseeds: World Markets and Trade report from the U.S. Department of Agriculture.

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.

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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.

To read the full report, click here.

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