September 18

9/18 - Soybean oil prices are steady for now, but two powerful forces have the potential to drive prices higher. The first is El Niño’s effect on palm oil in Malaysia and Indonesia. Soy-oil and palm oil prices are highly correlated and past El Niño events have seen drought-affected palm oil prices more than double. Secondly, due to new refining techniques, renewable diesel can now be made from 100% veg-oil and is indistinguishable from petroleum-based diesel. In last week’s WASDE, the USDA pegged soy-oil use for biofuel at 12.5B pounds or 46.5% of all 2023/24 U.S. soy-oil production. Soy-oil futures, which had bottomed at $.4620 per pound on 5/31, have recovered to $.6338 (9/15). Over the past 2 months, the USDA has raised its 2023/24 soy-oil price forecast from $.60 to $.63/lb. With soy-oil futures contracts for 2024 averaging $.59/lb, buyers may want to consider at least partial coverage for next year.