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In the past period, due to the tight global inventory of sunflower seed oil and palm oil, the domestic soybean oil price center has been continuously rising. Although there has been a cautious sentiment in the market in recent weeks due to high soybean yields in South America and changes in biodiesel policies in the United States and Indonesia, the domestic demand for soybean oil is relatively strong as the New Year and Spring Festival holidays approach, and inventory will decrease, which will continue to support the soybean oil market.
Squeezing profits and shrinking
In the past few weeks, the cost of imported soybeans arriving at the port in China has remained relatively stable, but domestic oil meal prices have both fallen, resulting in a reduction in soybean crushing profits and losses for some oil factories. According to relevant data calculation, the profit of imported soybean crushing is generally between 10-40 yuan/ton, while the profit of crushing American soybeans in December has been around -50 yuan/ton, and the profit of crushing Brazilian soybeans has shrunk to only 10-20 yuan/ton. Due to the decrease in squeezing profits, domestic oil factories are more willing to raise prices for soybean oil, especially with the upcoming New Year and Spring Festival, the resistance of soybean oil to decline will inevitably be significantly enhanced.
Inventory continues to decrease
Affected by factors such as losses in soybean crushing, weak soybean meal market, and high inventory, the operating rate of domestic oil plants has declined in recent weeks. Currently, the operating rate of oil plants is around 48%, lower than the average data of the past few months, and the supply of soybean oil has decreased. And the data shows that the inventory of domestic soybean oil has been declining for five consecutive weeks, currently at around 1.14 million tons, a decrease of about 170000 tons from the previous high point. This inventory data is also lower than the 1.19 million tons in the same period last year. The sustained decrease in soybean oil inventory provides some positive support for the soybean oil market.
The Spring Festival is gradually approaching
New Year's Day and Spring Festival are approaching, and we are currently in a period of strong demand for vegetable oil. The latest data shows that in the past week, the domestic soybean oil contract procurement volume was 1.41 million tons, an increase of more than 9% from 1.28 million tons in the last week of November. As the New Year's Day and Spring Festival holidays approach, the demand for replenishment and procurement of soybean oil from food and catering enterprises as well as residents will continue to increase. Especially in the context where soybean oil has a higher cost-effectiveness compared to bulk oils such as palm oil, the demand side will also tilt towards soybean oil.
Policy benefits increase
The Central Politburo meeting once again emphasized the implementation of more proactive macro policies, expanding domestic demand, and stabilizing the real estate and stock markets. As a result, the demand expectations in the domestic commodity market, including soybean oil, have improved, and the market atmosphere has undergone a certain degree of transformation. Some commodities that have fallen to low levels in recent years have risen, which also supports the relatively good supply and demand of the soybean oil market to a certain extent.
In addition, currently in the growth stage of soybean crops in South America, weather changes after January usually directly affect the growth and yield of soybean crops. The economic policies of the elected president after the US election will also affect the global trade situation. As far as the current market is concerned, oil factories are facing losses, and manufacturers have a strong willingness to raise prices in the soybean oil market. Supported by the decrease in oil factory operating rates and the demand for restocking before the Spring Festival, domestic soybean oil inventories are expected to further decrease. The high price difference between soybean oil and other oils will also help maintain strong demand in the soybean oil market, which will lead to a more optimistic price outlook in the domestic soybean oil market in the future.