Soybean oil market dynamics, supply and price volatility in the South American region

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.

Soybean oil price and production outlooks amid policy and climate changes in South America

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.