Soybean Oil Demand Surges in the US
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In the United States, Soybean Oil is the most widely used Vegetable Oil, accounting for more than 50 percent of all domestic Vegetable Oil use. It can be found in food products such as baked goods, snacks, cooking Oils, mayonnaise, salad dressings, and processed frozen foods. Soybean Oil’s popularity, in large part, can be attributed to its status as the most widely grown U.S. Oil crop. Its use as a feedstock in the production of biofuels has sparked increased domestic demand for a product that can help transportation fuel producers meet mandated renewable fuel obligations.
In addition, lower international supplies of alternative Vegetable Oils fostered competition for Soybean Oil in the global market. Several factors contributed to decreased supplies of these Oils, including drought in Canada and the U.S. Northern Plains, conflict between Russia and Ukraine, and migrant labor issues in Indonesia and Malaysia. Reduced supplies raised international Vegetable Oil prices. Consequently, U.S. Soybean Oil prices rose more than 50 percent in 2021 and continued to climb in 2022.
During the past 30 years, average Soybean Oil prices hovered between 20 and 30 cents a pound. Prices rallied in the spring of the 2020/21 marketing year. At the onset of the rally, prices of Soybean Oil in the Decatur, Illinois, market—the industry’s benchmark for U.S. Soybean Oil prices—averaged a record $0.73 per pound, nearly 30 percent higher than the previous year’s average price. This was eclipsed in May 2022 when prices reached $0.87 per pound, boosting the springtime average to $0.83 per pound. Food manufacturers paid higher prices for Soybean Oil and other fats and Oils, eventually passing those increases to consumers buying food in grocery stores and restaurants.
In the October 2022 Food Price Outlook data set, USDA’s Economic Research Service forecasted a 9.5 percent to 10.5 percent increase in the 2022 all-food Consumer Price Index (CPI)—a widely used measure of food inflation. Fats and Oils—accounting for 2 percent of the all-food CPI—showed a historically significant price increase of 18 to 19 percent for 2022. Rising prices for other foods corresponded directly with higher fats and Oils prices, including Soybean Oil.
Inflation is one factor in the Soybean Oil price changes, but it is not the only driver. Canada, Europe, Russia, and Ukraine, significant canola and sunflower seed Oil suppliers, produced lower-than-expected Oilseed crops between 2019 and 2021. USDA estimates show global stocks fell relatively tight for these significant Vegetable Oils in 2020/21. The lower supply increased demand for Soybean Oil, contributing to the initial surge in Soybean Oil prices.
This was further exacerbated by the conflict between Russia and Ukraine that started in February 2022, prompting market uncertainty about Ukrainian sunflower seed Oil supplies. This induced price volatility across the global Vegetable Oil market while simultaneously eliciting demand for alternative Vegetable Oils. Given the availability of Soybean Oil and its many practical uses, it was in high demand—ultimately contributing to price increases. Reduced Soybean yields in South America in spring 2022 extended the price run-up.
Domestic Demand for Soybean Oil in the US
Historically, domestic demand for Soybean Oil as an ingredient for food, animal feed, and other industrial uses has increased steadily with U.S. population growth. More recently, State and Federal policies have encouraged using various biomass feedstocks, namely Soybean Oil, in fuel production to reduce greenhouse gas emissions. This has resulted in significant changes in the two distinct categories of domestic Soybean Oil usage—what the agricultural industry refers to as “domestic disappearance”—in (1) food, feed, and other industrial uses and (2) biofuel use.
Domestic disappearance is calculated using the official production and stock data reported by USDA’s National Agricultural Statistics Service and trade data reported by the U.S. Department of Commerce.
Other sources: ERS USDA
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