USDA: US soybean oil premium hiked
“US soybean oil has a premium of around $150 a tonne compared to South America, due to higher demand projections from industrial users, pushing up prices. The premium has increased from $20 a tonne in early April to $400 in June 2021; furthermore, the premium averaged $270 a tonne from April to August last year, according to the US Department of Agriculture (USDA).
“During the second week of June, the US bid for soybean oil at $1,932 per tonne free-on-board, while the Netherlands offered $1,876. The most competitive was Argentina’s offer at $1,711, while Brazil’s offer was $1,725. Since India mainly imports soybean oil from Argentina and Brazil, the premium is unlikely to have any impact,” according to BV Mehta, Executive Director, Solvent Extractors Association of India (SEA).
USDA’s Foreign Agricultural Service said in a report,”During the 2022-23 marketing year beginning in September, the U.S. Food and feed use of all oils in the U.S. is projected to grow by less than 1 percent.”
“There has been a tremendous jump in the prices of soybean oil and petroleum this year. Soybean oil prices are up 30 percent in the United States and more than 20 percent in South America this month. On the other hand, petroleum prices have increased by 45 percent during the same period,” reports says.
“In the United States, 40 percent of soybean oil is used for the production of biofuels, with maize (maize) accounting for the remaining 36 percent. As a result of the Russo-Ukraine conflict, the issue has gained prominence causing skyrocketing prices of food items such as wheat, corn, oilseeds and barley,” according to analysts.
“Of the 240 million tonnes of edible oils produced globally, about 50 million tonnes (MT) are used for bio-diesel with additional industrial uses. Most of the edible oil supply is in practice being diverted to fuels including Indonesian crude palm oil, where 30 percent of production is earmarked for biodiesel,” according to Mehta.
According to the World Resources Institute,”With skyrocketing prices and rising inflation in the United States, the debate has resurfaced over food versus fuel and whether wheat crops should be diverted for fuel. Food crop conversion efficiency is low, threatening sustainable food futures.”
The study concluded,”Such low conversion efficiency explains why it takes a large amount of productive land to produce a small amount of bioenergy and why bioenergy has the potential to increase global competition for land.”
According to USDA,” The rising price premium for US soybean oil reflects a strong demand versus supply balance in the United States relative to Brazil and Argentina. Domestic market of US is expected to consume 93 percent of the total soybean oil produced this year. This compares with 80 percent in Brazil and 13 percent in Argentina when biodiesel exports are taken into account.”
“With imports expected to account for a quarter of the total domestic consumption as the United States is also a net importer of vegetable oil. Total domestic oil consumption is expected to increase by 9 percent in 2022-23 over the previous year. This is in contrast to Brazil, where domestic oil demand is expected to fall in the coming year from 2020-21,”as per report.
According to USDA,”In the mid-2000s, rising energy prices became the primary price driver for vegetable oils. Today the situation has changed, reflecting tight supply with rising vegetable oil prices. Incidents in Ukraine, droughts in Canada and South America, as well as trade sanctions in some countries have reduced the supply of available vegetable oil.”
Mehta of SEA said that the policy of every country is self-centred.
Biofuels derived from food crops such as corn, vegetable oil and sugarcane currently account for about 2.5 percent of the world’s transportation fuel, according to the World Resources Institute.
Furtehr states that if crop-based biofuels are phased out, the projected 70 percent calorie gap will reduce to 60 percent in 2050, an important step towards a more sustainable food future.