Sometimes the Market is not the Market it seems…

There’s a long list of “what ifs” that support a bullish soybean oil thesis. 2025 RVO increase, 45Z import exclusion, Indo B40, discount to palm/massive exports. Eventually some of these may give us a rally. 

But man, I’m not feeling it today like I was a month ago… 

Maybe bean oil is cheap because it’s the best proxy for Canadian canola oil. There’s no CBOT canola oil futures contract to watch, chart, and trade. There is no reporting requirement for weekly import purchases into the USA. So we all see the sales flash to India, but not the import trades offsetting it from our northern friends. The USA enjoyed a 96% market share of Canadian canola oil exports in 2024 thru October, 2.7 of 2.8 mil MT total…on pace to be up 13% YOY and up 58%! from 2022. 

Maybe the China/Canada trade spat is a bigger problem for N American oil than I’ve been giving it credit. It threatens to strand ~5 Mil MT of seed in Canada. ~75% of 2024 exports were to China. The path of least resistance for that seed is that it stays in N America and the oil ends up in the US.

Maybe Mr Market sees the easiest way to move oil into the US is via Canadian canola. Its  pretty fungible with SBO on grocery store shelves and in foodservice. A 45Z import exclusion could slow down Tallow, UCO, etc. But canola oil can keep rolling, and hit the food side of the SBO balance sheet. Food is still half of SBO demand in the US at 5.4 Mil MT annually. Lots of room there to take more market share.

Maybe, just maybe, this bean oil rally I expect is going to take longer than I anticipated. 

Image AI Generated

Tables From Canola Council of Canada canolacouncil.org