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South America, the main supplier of soybean oil to global markets, has been undergoing profound changes in recent years. The trends we are seeing in two main markets, Argentina – the world’s largest exporter of soybean oil – and Brazil, the world’s largest producer of soybeans, will shape global trade dynamics in the coming years.
On the one hand, Argentina is once again consolidating its position as the leading exporter of soybean oil and meal after a good 2023-24 harvest, which is crucial for the recovery of its domestic soybean supply, disrupted in previous seasons by drought. On the other hand, Brazil is betting on energy transition as one of its engines of growth and expanding its biofuels policy, reducing feedstock exports to meet national supply levels, and thus reducing availability for the global market.
Tighter margins due to falling agricultural product prices, delayed planting due to warmer-than-normal conditions in Brazil and new regulations are the challenges that mark the start of the 2024-25 season in South America. At the same time, the biofuels agenda is taking off with the implementation of mandates for sustainable aviation fuel (SAF) and the expansion of biofuels policies worldwide, intensifying the competition for feedstocks in the global arena.
Sharp declines in agricultural commodity prices have marked the 2024 season. Fastmarkets’ price assessment of crude-degummed soybean oil in central Illinois went from an average of 48.4 in January to an average of 42.55 cents per pound in September, a 12 percent drop. The soybean oil future contracts in the Chicago Mercantile Exchange (CME) dropped by the same magnitude in the same period, reaching the lowest level since December 2020 and reflecting a loosened supply.
In 2024, Argentina harvested a record-breaking soybean crop that was crucial to replenishing its domestic inventories, which were way below the historical average due to the drought-reduced crop of the prior year. Argentine crushers recovered their crushing volumes to the historical average at the beginning of the year, which was key to re-establishing the Argentine position as the leading exporter of soybean oil.
The price drop in the soybean complex through 2024 is a market response to the large crops produced in the Americas since 2023. Brazil has been growing crops for above 150 million tons since the 2022-23 season and the US has had crops of above 115 million tons for the last two marketing years. The United States Department of Agriculture (USDA) data suggests that the global stocks-to-use ratio is up from 15 percent in 2021-22 to 16.6 percent in 2023-24, forecasting another increase to 18.7 percent in 2024-25.
For the next season, Fastmarkets expects Argentina and Brazil to produce 19 million tonnes of soybean oil, three million tonnes above the year before.
The 18 percent increase in soybean oil production is driven primarily by the recovery of the Argentinian crushing industry, which Fastmarkets expects to increase its soybean oil production by three million tonnes to 8.2 million tonnes.
In contrast, Brazil is expected to grow marginally in its soybean oil production in 2024 at 10.8 million tonnes but significantly increase its biofuel feedstock domestic demand.
Fastmarkets expects that biodiesel production will grow 20 percent in 2024 and forecasts a growth of 11 percent in 2025.