The world vegetable oil market is closely monitoring the happenings in the Indonesia biofuel market. The Indonesian government had stated it would raise its biofuel blend rate to 40 percent Jan. 1. This move was delayed, holding the blend rate at 35 percent. Officials claim the delay to the increase is just temporary and will be taking place shortly. Indonesian authorities further state the blend rate will increase to 50 percent for 2026 and then 60 percent after that. Indonesia does not have near enough vegetable oil to satisfy this demand and imports will be needed. The possibility of this increase has been providing complex support, but delays are tempering additional buying in the complex.

The official November soybean crush report in the monthly Fats and Oils report came in better than expected at 210 million bu. This was down 6 mbu from October, but 10 mbu more than in November 2023 and a record for the month. Cumulative soybean crush is now running 6.1 percent ahead of last year at this time. The end of November soy oil inventory was larger than expected, coming in at 1.6 billion pounds. This was 200 million pounds above the average trade estimate. Given the growing demand we are seeing for biodiesel production, trade showed little concern in the higher soy oil stocks.

The ethanol grind data for November was also released with a high total. Ethanol manufacturing consumed 465 mbu of corn in November, a steady volume from October, and 2 percent above the November 2023 total. What is most impressive about this corn grind is that it was reached with minimal returns. Most ethanol plants across the U.S. are barely breaking as energy values have softened while corn values have firmed.

Ethanol export data for the month of November 2024 was also supportive for the industry. Total U.S. ethanol exports were 188 million gallons for the month, up from the 143 million gallons in October and well above the 115 million gallons of exports in November 2023. The top U.S. ethanol export destination remains Canada with 57 million gallons of November shipments. This was a 17 percent increase from November 2023. India is the 2nd largest ethanol trade partner with 24 million gallons, a 77 percent increase on the year. These two importers were followed by the United Kingdom with 18.2 million gallons and the Netherlands with 16.8 million gallons.

China is seeing several of its commodity values drop to multi-year lows, including wheat. China imported a large volume of wheat for both milling and feed purposes right ahead of the harvest of a record domestic crop. At the same time, flour millers are reporting lower than hoped for consumer demand ahead of the Lunar New Year celebration, same as we are hearing from China’s pork industry. Sino, China’s government grain agency, has also lowered its minimum price floor for government wheat at public auctions due to oversupply. This comes as China appears to be producing another large winter wheat crop, putting additional pressure on its markets.

While wheat has been pressured in China, wheat values in India have rallied to record highs as domestic supplies start to become exhausted and milling demand spikes. Several millers in India claim they cannot run at full capacity due to low wheat inventories. The concern is what this is doing to food costs in the country, as inflation has just started to ease after hitting a 14-month high in October. India may need to up its imports to ease inflation and satisfy demand, and with an uncertain Black Sea supply, this favors U.S. exports. 

We are at a point on the calendar that may give us a much better indication of Chinese commodity demand for the remainder of the marketing year. The Lunar New Year celebration is underway in China, a time when China tends to see its greatest commodity demand of the year. Two of the main products that see elevated consumer demand during this time are flour and pork. There are concerns in China that unless record demand is seen over this period, stocks of these two commodities could rise to near burdensome levels. This has already slowed China’s imports of pork and wheat, but further reductions are quite possible.

A pressing story in the market has been the announcement that Argentina will temporarily lower its export taxes on soybeans and corn. The current export tax on soybeans is 33 percent and this will be lowered to 26 percent from now through June 30. Lower taxes will be seen on soy products as well. On corn the export tax will drop from the current 12 percent to just 9.5 percent. Argentine officials claim improved economic conditions and a need for farmer assistance to cover the production losses from this year’s crops. While there are several different reads on this move, the fact the government is concerned with the country’s crop sizes is worth noting.

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