Fundamentally Speaking

We have seen a huge correction in the long oil-short meal share of the combined soybean crush margins as a little over a week ago it was over 48.5%, one of highest percent of the soybean crush value and well above the long-term average of 33%.

As of December 7 however, it is closer to 40% as soybean oil has plunged by over 15 cents per pound the past few days in reaction to very disappointing volume figures for the latest Renewable Fuels Mandate targets for biodiesel as indicated last week by the EPA.

Add to that heavy fund liquidation and crude oil futures trading at its lowest levels of the year further undermining the profitability of biodiesel production.

Yet in looking at the whole vegetable oils situation, it is soybean oil that still has the tightest stocks-to-use ratios.

The world vegetable oil stocks-to-use ratio is composed of cottonseed, olive, palm, palm kernel, peanut, rapeseed, soybean, and sunflower seed oils.

What is different here as opposed to the world oilseed or global protein meal situation is that soybean oil is not the dominant vegetable oil produced.

That is palm oil, which accounts for 36% of world vegetable oil output with soybean oil coming in second at 29% with rapeseed or canola oil at 13% and sunflower oil at 9%.

This graphic shows the total world vegetable oil stocks-to-use ratio since the 1983/84 season and also has the global stocks-to-use ratio of palm, soybean, rapeseed, sunflower oils along with the stocks-to-use ratio of just U.S. soybean oil.

This year's global vegetable oil stocks-to-use ratio at 14.2%, though down from last year's 14.3%, is still one of the highest ever mostly due to brimming palm oil inventories at 16.95 million tonnes are the highest ever and the 2022/23 palm oil stocks-to-use ratio is the second highest ever at 22.1%, more than 7% above the 20-year average.

In fact, the only major vegetable oil that has a lower stocks-to-use ratio this year than last is sunflower oil at 12.7% vs. the year ago 13.0%, but the current figure is equal to the five-year average.

Of note is the world soybean oil stocks-to-use ratio at 8.2% is above last year's 7.4% which was one of the lowest ever, but the 2022/23 world soybean oil stocks-to-use ratio is the only one of the major oils to have its current ratio below the five, ten and 20-year averages and the same thing for the U.S. soybean oil stocks-to-use ratio where the 2022/23 figure of 6.9% below the year ago 7.5% level and the fourth lowest over the past 30 years.

(c) Copyright 2022 DTN, LLC. All rights reserved.