SOYBEAN OIL DEMAND FROM THE BIOFUELS SECTOR: PRICES HIT NEW RECORD
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SOYBEAN OIL DEMAND FROM THE BIOFUELS SECTOR: PRICES HIT NEW RECORD

Jayant Agro Organics Ltd

*Chicago Board of Trade rose nearly 72% this year

*Mustard Mission of Rabi having yield potential more than 20 quintals per hectare


Soybean oil prices hit a record high on Monday in response to rising demand from the biofuels sector. Soybean oil futures on the Chicago Board of Trade rose nearly 72% this year. This rise has made soybean oil one of the best-performing assets of the year. Most-active soybean oil July futures on Monday intraday at 73.73 cents per pound (454 gram), an all-time high settle. That topped the previous high hit in 2008.

July soybean futures closed higher at $16.23 a bushel (27.218 kg). New-crop November soybean futures $14.62. All of which means only one thing, higher food prices which will ultimately drive inflation. Money managers soybean net long stood at 138,788 contract (each 5000 bushel) futures and options contracts, down fewer than 1,000 on the week. They extended their net long in soybean oil by fewer than 1,000 contracts to 86,084.

Booming global vegoil demand and an expected tightening in soyoil supplies over the next year have kept futures at historic levels. The U.S. Agriculture Department expects the biofuels sector to consume 12 billion pounds of soybean oil in the 2021-22 marketing year—up from an estimated 9.5 billion pounds in 2020-21, according to its monthly supply-and-demand report.

Producers are racing to keep up. Production capacity for soyoil in the U.S. is expected to grow to 935 million gallons in 2021, nearly double from where it was last year, By 2023, its capacity is expected to exceed 2 billion gallons annually. The sentiment now from the market is that it’ll be an exceptionally long time, even into 2022, until the market gets back to normal, said Mr. Holland in a virtual conference in May.

Brazilian soybean exports reached 16.4 million tons in May, up 16.3% over the same period in 2020, according to data released by the Ministry of Finance’s. China, the world’s top importer of soybeans, brought in 9.61 million ton (9.38 million ton in May 2020) of the oilseed in May, up 29% from 7.45 million tonnes in April, when some Brazilian shipments were delayed, data from the General Administration of Customs showed.

China brought in 38.23 million tonnes of soybeans in the first five months of 2021, up 12.8% from the same period last year. The figures were within market expectation. Imports from May-July are usually quite large each year, were expected to exceed 10 million tonnes. There were also some delayed cargoes. Traders said some cargoes would be rolled over due to the delays and arrive in China in June.

As per the National Food Security Mission oilseeds production in India has increased from 27.51 million tonnes in 2014-15 to 36.57 million tonnes in 2020-21 (3rd advance estimates). Experience in the Mustard Mission of Rabi 2020-21of only selected varieties having yield potential more than 20 quintals per hectare resulted in 13% increase in productivity and 14% in production from almost the same area.

(Disclaimer: This analysis is only for educational purpose and is not and must not be construed as investment advice. It is analysis based purely on economic theory and empirical evidence. Readers are requested to kindly consider their own view first, before taking any position.) Date: 7-6-2021

Samarth Mercantile

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