Canada Markets

With strength in soybean oil helping support canola and soybean markets in the past week, attention is being drawn back to just how exceptional the export demand for the former has been. The market put soybean oil on sale for the world, assuming the worst for biofuel production, and it now looks like both sources of demand may have a bright future. And that could cause issues for supply.

The accompanying chart shows the total commitments to date (outstanding sales plus accumulated exports) and that of the closest comparable date going back 25 years. A picture is worth a thousand words -- but to really appreciate how impressive the results have been, recall that USDA was estimating total exports of 600 million pounds for the entire year (up until the first revision higher in December). With 2.008 billion pounds committed in less than six months, USDA has had to keep revising their estimates higher -- currently expecting 1.8 billion pounds in exports for 2024-25 with that sure to be revised higher again.

The two years exceeding the current export pace ended with 3.359 billion pounds of soybean oil exports in 2009-10 followed closely behind by 2010-11 at 3.233 billion pounds. There is inadequate supply currently projected to return to anything like that, but it does highlight the implications export potential could have. It also gives an indication of how much supply would have to be made available either through higher soybean crush or reduced biofuel production should exports fail to slow.

The resurgence of interest in soybean oil by importing countries comes from strong palm oil prices thanks to reduced production at a time of increasing blending requirements in Indonesia and India in particular. The result was a record large discount for soybean oil prices compared to palm oil in the fall of 2024. By early December, nearby soybean oil futures hit a record discount of $-221 USD/mt versus nearby palm oil futures. In fact, up until September, soybean oil had never been a discount to palm oil.

Corrections in both markets resulted in the spread going back to a more normal $65/mt premium for soybean oil and export sales dried up by mid-January. Not for long, though, and by the end of March soybean oil was back to a $-125/mt discount to palm oil and export interest picked back up. With last week's jump in soybean oil prices, the discount narrowed to $-41/mt. Malaysian palm oil futures have been closed to start the week, but will have some catching up to do once open given the gains seen in bean oil.

It is worth noting that USDA's first look at 2025-26 soybean oil exports at the 101st Agricultural Outlook Forum penciled in an increase to 1.675 billion pounds, suggesting they are expecting export interest to remain over the long run.

That takes us to the elephant in the room -- confusion and conflicting signals about the Trump administration's support for biofuel. It has been over three months now since blending credits expired (at the end of 2024) with no official word on their extension or replacement.

The impacts are becoming clear with January biodiesel and renewable diesel production statistics released by the U.S. Energy Information Administration (EIA). For the month, soybean oil used in the production of both fell 44% from the previous three-month average -- at 654 million pounds compared to 1.172 million pounds on average. As a side note, canola oil was worse off with production use falling 58.3% from the previous three-month average. Industry data and anecdotal reports suggest a continuation in slowdown -- if not an acceleration in slowdown -- for February and March should be expected once official data is released.

And thus, the month-long break in price beginning Feb. 10 that resulted in May soybean oil futures falling from 48.55 cents/pound to 41.08 cents. Basically, putting soybean oil on sale and inspiring strong export demand and this update.

Unofficial reports are finally supporting markets with oil industry and biofuel production leaders meeting to try to hammer out a consensus over a new national biofuel policy. USDA Secretary Rollins announced funding for biofuel infrastructure projects, which fueled speculation that progress is in fact being made. See Todd Neeley's report at https://www.dtnpf.com/… for more.

Adding to the credibility of the speculation -- with the use of an executive order, President Trump established the National Energy Dominance Council on Feb. 14, which included "biofuels" in the list of "amazing national assets."

On a final note, the cut in planting intentions for soybeans will not directly impact old-crop soybean oil production, but will certainly increase the anxiety and sensitivity for the entire soybean complex going forward.

For more, see Todd Neeley's story "Fuel Groups Jockey for RFS Position" at https://www.dtnpf.com/….

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Mitch Miller can be reached at mitchmiller.dtn@gmail.com

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