撰写[Introduction] This week, the latest monthly supply and demand reports of MPOB in Malaysia and USDA were neutral and empty, which had no obvious negative impact on the soybean oil market. Recently, influenced by the geopolitical situation, soybean oil, as a raw material of biodiesel, has been driven higher by strong international crude oil, and domestic soybean oil has been adjusted with the international market. At present, the international macro-environment is relaxed and the commodity market is favorable. It is expected that soybean oil will maintain a strong trend in October, but the increase in the spot market is limited due to loose supply and sluggish demand.
The monthly supply and demand report of American farmers is limited
According to the latest monthly supply and demand report of USDA, it is estimated that the US soybean output in 2024/25 will be 4.582 billion pu (121,109 kilotons), with an average yield of 53.1 pu/acre. In contrast, the USDA’s estimated output and yield in September were 4.586 billion pu and 53.2 pu/acre respectively. The final inventory of soybeans in the United States remains unchanged at 550 million pu; Maintaining the South American soybean production forecast unchanged, the global soybean ending inventory was slightly raised by 70,000 tons to 134.65 million tons.
This report slightly adjusted the yield and yield of American beans, which basically met the market expectation (yield of 4.579 billion bushels, yield of 53.1 bushels per acre); Although this report lowered the US soybean production forecast, it is expected that soybean production will still hit a historical high. As can be seen from Figure 1, the soybean production in the United States in 2024/25 was the highest in the past 20 years, much higher than the average output in the past 20 years. On the whole, this monthly supply and demand report is neutral and empty, which has no obvious drive to the soybean market, and the impact of soybean oil from the cost side is limited.
Low inventory drives palm oil prices up and soybean oil prices up.
According to the data of palm oil supply and demand released by Malaysian Palm Oil Bureau (MPOB) in September, the palm oil production in Malaysia was 1,821,900 tons, down 3.80% from the previous month, which was lower than the market expectation of 1,858,000-1,860,000 tons. The export volume was 1,542,800 tons, up 0.93% from the previous month, slightly higher than the market expectation of 1.49-1.5 million tons; Domestic consumption was 154,000 tons, down 38.40% from the previous month; At the end of September, the inventory was 2,013,800 tons, up 6.93% from the previous month, which was higher than the market expectation of 1,882,000-1,950,000 tons. Compared with the estimated data released by previous institutions, the output is lower than expected, the export volume is higher than expected, and the inventory exceeds market expectations. The data in this report is neutral and empty. However, from the inventory data, the inventory in September is still at a low level in the same period of nearly three years, so the short-selling impact on the palm oil market is limited.
There is a substitution relationship between soybean oil and palm oil. In most cases, affected by the cost side, the price of soybean oil is higher than that of palm oil, and the price difference between soybean and palm fluctuates in the range of 800-1000 yuan/ton. Unless extreme circumstances occur, the price difference between soybean and palm oil may be negative. Since the beginning of this year, the spread of soybean and palm oil has shown an unusual trend, mainly due to the strong fundamentals of palm oil itself, and the price has continued to rise, thus making the spread of soybean and palm oil turn from positive to negative in March this year, and then continue to be sorted out in a low range. Although the monthly supply and demand report data of MPOB in Malaysia failed to provide bullish guidance, it supported palm oil rising due to the persistently low palm oil inventory, strong crude oil and loose macro-environment, or led to the persistently low price difference between soybean and palm oil, thus boosting the demand for soybean oil in the market.
In addition, shipping survey agencies estimate that Malaysia’s palm oil exports increased by 13.6% to 18.9% in early October. Palm oil exports have performed strongly so far this month, which has supported a significant increase in Malaysian palm oil futures. As can be seen from Figure 3, the trend of domestic primary soybean oil and Malaysian palm oil futures is basically the same. In recent years, palm oil has basically replaced soybean oil, which has a great influence on the trend of soybean oil market. As of the week of October 11th, the average contract price of palm oil in Malaysia was RM4,298/ton, which was 6.31% higher than that in the week before the holiday. The average price of domestic first-class soybean oil in Zhou Du was 8,340 yuan/ton, up 2.21% from the previous week.
Domestic soybean oil transactions were light.
Due to the overall high market price of soybean oil and the limited recovery of terminal demand, the overall performance of Zhou Du’s trading volume in the second half of this year was poor, and even the peak season was not prosperous. As of the week of October 10th, the turnover of domestic soybean oil in Zhou Du was 17,900 tons, slightly lower than that of 18,000 tons in the week before the holiday, and even the turnover of key enterprises in some markets was zero during the week. The poor turnover of soybean oil market has limited the market price increase to some extent.
Soybean oil is expected to continue to rise in October.
In the international market, according to CME’s "Fed Watch", the probability that the Fed will drop by 25 basis points in November is 95.6%, and the probability of maintaining the current interest rate unchanged is 4.4%; The probability of cutting interest rates by 50 basis points in December is 84.1%, and the probability of cutting interest rates by 75 basis points is 0%. The probability of a cumulative rate cut of 100 basis points is 0%. It can be seen that the international financial environment is still favorable, commodity prices are higher, and soybean oil is naturally supported by the big environment. In addition, although palm oil was still under the pressure of increasing production in October, palm oil inventory continued to increase, and the origin inventory may reach the annual high at the end of October, but it was still at a low level in the year to support the oil market, thus boosting the soybean oil market. Although the US agricultural supply and demand report has a downward drive on the US soybean futures price, with the gradual digestion of the market, the US soybean futures may be supported around 1000 cents/bushel, so the short-selling impact of soybean oil from the cost side is limited.
In the domestic market, with the end of the National Day holiday, the starting load of domestic oil plants has obviously increased. This week, some enterprises resumed normal startup after finishing maintenance or digesting the original inventory pressure, and the supply of soybean oil gradually stabilized. Due to the general lack of stocking by downstream users in the early stage, there is still demand for replenishment in the post-holiday market, but the expected increase in demand is limited, which restricts the market trend to some extent.
To sum up, the macro environment is bullish on the soybean oil market, and judging from the trend of main contracts in the commodity futures market, it is expected that the soybean oil market will maintain a strong consolidation this month, but there may be room for ceiling price to rise due to limited domestic demand.