Bullish Fundamental – Soybean Oil Comparative Value

I’m still looking at reasons to NOT be bearish ag commodities headed into the US fall.

Here’s another reason…SOYBEAN OIL.

Expect US soy crush records this fall.  That plus uncertainty around the 2025 45Z/Producers Tax Credit implementation makes a Q4/Q1 bean oil stock build not a question of if, but how much.  As a result, the market has hammered bean oil prices.  Look at the first chart, taken from the USDA’s August Oilseeds:  World Markets and Trade report for reference.

So why be bullish now?  US SBO is priced right in the mix with other major oils. Price sensitive global players are happy to switch from palm to soy if it saves them money.  Its classic cross price elasticity of demand.  And as you see in the second chart, the palm oil export market is a behemoth, 48 MMT annually.  Compare that to the global SBO export market at about 12 MMT, and total US Biofuel demand of 6.4 MMT.  A little bit of export market share will go a long way to support prices, even if the US Biofuel market gets a sluggish start to 2025.

Bean oil looks cheap enough.  Unless palm oil breaks, there’s little incentive to be short.  As the US finds some export business in this price range, the stock build will be manageable.  And before you know it oil will have a story again, and prices will react.