Bean Oil Rally Culprits Are NOT What You Think!

There is no shortage of suspects when one looks for the culprit behind Chicago bean oil’s 50% fall since April 22.  The disappointing RFS announcement last year was a gut punch.  Incredible increases in US UCO imports didn’t help.  Record US bean crush volumes share some guilt too. And while citing these things as bearish drivers feels right….it misses MOST of the story… bean oil at 90 cents wasn’t really a bean oil story to begin with.  It was a macro/supply chain/energy rally obscured by splashy headlines around renewable demand buildouts.

Look at this chart of US diesel and soybean oil futures. 

Diesel prices tripling from Jan 2021 to April 2022 drove much of the veg oil rally we experienced.  Bullish bean oil fundamentals were the icing, not the cake.  It’s easy to look at markets and ascribe their actions to headlines.  It’s never that simple.

It’s true US bean oil demand is robust.  The US crush story is a good one.  I’m a believer.  But seizing the soy crush opportunity requires managing through big macro moves and the price volatility they bring.