We are starting to see a shift in how trade is looking at global oilseed balance sheets. This follows two of the world’s oilseed producers reporting crop failure – these being the Black Sea and European Union. Indonesia is also reporting a drop in vegetable oil stocks. At the same time, we are seeing a build in world biodiesel demand, including in the United States. Even with a large soybean crop in the U.S. and projections for a big crop out of South America, this shift may bring a tightening in world vegetable oil supplies. It is also quite likely to bring the U.S. additional export trade.

The latest supply and demand numbers from the USDA verify this added soy oil consumption and draw on world reserves. The greatest decline in soy oil reserves is in the United States, with ending stocks now projected at a razor thin 1.536 billion pounds this year. This is a 5.3 percent stocks-to-use ratio, the tightest level in recent history.

Energy data for the month of August showed 1.21 billion pounds of soy oil was consumed in biofuel manufacturing. The was the third largest monthly use on record and a 1.66 percent increase from August 2023. This is one the primary reasons we have seen strength in the soy complex recently. Used cooking oil consumption in biofuel production totaled 695 million pounds in August compared to 657 million pounds in July and 611 million pounds in August 2023. Renewable diesel capacity in August held steady from July at 4.6 billion gallons per year, which is a 24 percent increase from August 2023.

This increased consumption of soy oil in biofuel production has closely aligned futures trade between the soy complex and crude oil. This has been evident with sharp gains and losses in soybeans while the grains move in different directions in recent sessions. It has also tempered some of the market reaction to traditional fundamental news such as weather concerns in South America.

While this elevated demand has been favorable for global vegetable oil values, it has also caused an increase in vegetable oil products, mainly those used for food purposes. World vegetable oils rallied 7.3 percent in the month of October. This followed through to a 2 percent increase in food costs for the month. This is the highest world food values have been in the past 18 months, but still well below the COVID era highs. Lower red meat costs offset some of the increase in vegetable oils, but these have now started to firm as well.

In other renewable fuel news, information from the Energy Information Administration shows how much demand for U.S. ethanol there is in the global market. Over the first eight months of 2024, U.S. ethanol exports averaged a record 120,000 barrels per day. The five-year average leading up to this was 80,000 barrels per day. Data also shows total U.S. ethanol exports to date are already higher than all of 2023’s exports.

Much of this demand has been from Canada, but the U.S. is now exporting to 30 destinations compared to 21 just last year. One importer the U.S. has lost is Brazil, who has expanded its own ethanol industry. While this has limited U.S. exports, it has also reduced export competition as Brazil now consumes more corn domestically.

This elevated use of biofuels is being noticed in the world energy market. OPEC has released its revised crude oil consumption numbers for this year and next, lowering them both. OPEC lowered its 2024 crude oil growth demand forecast to 1.82 million barrels per day, 100,000 fewer than its previous outlook. OPEC also lowered is 2025 demand forecast by 100,000 barrels to 1.54 million per day. Slowing travel forecasts and elevated use of renewable fuels are primary factors in these demand reductions.

China has finally released its October soybean import data showing the country took in 8.09 million metric tons of imports during the month. This brought marketing year imports to 89.84 mmt, an increase of 11.2 percent from last year. We also received China’s revised import estimate for the 2024/25 marketing year from the USDA’s attaché, putting it at 104 mmt. This was up 1 mmt from the previous forecast.

It is interesting to note that China imported 44.7 mmt of crude oil in October, 9 percent less than in October 2023. This marks the 6th consecutive month China’s energy demand has fallen short of the previous year and brings into question the benefits of recent economic stimulus packages in the country.

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