Although the recent Brazilian soybean premium has been gradually weakening, the strength of the CBOT soybean has offset the impact of the decline in the Brazilian soybean price discount. The market's expectation for future raw material costs has shifted upward, further solidifying the cost support for soybean oil. Moreover, the price of US soybeans has hindered the willingness for large-scale commercial purchases, and the future supply and demand structure of soybean oil is expected to tighten.

Recently, due to the unexpected increase in palm oil production in the origin and the expectation of a cooling in biodiesel demand, palm oil prices have been continuously declining, leading to a weakening of the edible oil sector. However, the easing of the trade friction between China and the United States and the expectation of increased soybean exports in the new season have supported the continuous rise in the futures price of soybeans, which has led to an increase in the cost of imported soybeans in China, providing support for the price of soybean oil and maintaining an oscillating trend.

Tightening of the US soybean supply and demand structure

Trade frictions have shown signs of easing. The Tariff Commission of the State Council of our country announced that it would cancel some tariffs on US agricultural products from November 10th, reducing the import tariff on soybeans from 23% to 13%, and the General Administration of Customs announced that it would resume the soybean import licenses of three US companies from November 10th, combined with the disclosure of negotiation details by the White House in the United States, our country will purchase 12 million tons of soybeans in the last two months of 2025, and the market trading expectations for the improvement of US soybean exports, COBT soybean futures prices have stood firm at 1100 US cents/bushel. Although the Brazilian soybean 12-month shipment premium fell by 45 US cents/bushel, to 235 US dollars/ton, the CBOT soybean strengthened by 100 US cents/bushel offset the impact of the decline in the Brazilian soybean price discount, resulting in an increase in the cost of imported soybeans in our country.

In addition, the US Department of Agriculture has announced that it will release the monthly soybean supply and demand report in November. Due to the easing of the trade friction between China and the United States, this time the export forecast for US soybeans may be increased. Moreover, the rainfall in the main soybean production areas of the United States was less than normal in August, and some areas were drought-stricken, which may affect the soybean pod filling. The previous yield level of 53.5 bushels/acre may be difficult to achieve, and this month's report may reduce the yield forecast, and the ending inventory may be further reduced, which will provide a bull narrative for US soybeans.

The negative impact of palm oil production increase has been fully priced in.

According to the supply and demand report released by MPOB on November 10th, Malaysia's palm oil production in October increased by 11.02% compared to the previous month, reaching 2.04 million tons, exceeding the expected 1.94 million tons; Malaysia's palm oil exports in October increased by 18.58%, reaching 1.69 million tons, significantly higher than the expected 1.48 million tons; Due to the recent significant decline in the origin's offer, it has attracted India to increase purchases and domestic one-sided buying, it is expected to help the origin's exports in the later period, and finally, Malaysia's palm oil inventory at the end of October increased by 4.4% compared to the previous month, reaching 2.46 million tons, higher than the market's previous expectation of 2.44 million tons. Although Malaysia's palm oil production in October set a new historical high in the same period in nearly 6 years, and the inventory reached the highest level since October 2023, the overall supply pressure is slightly higher than the market's expectation, but the export demand is significantly higher than the expectation, and the recent futures market has continuously digested the market's concern about the production exceeding the expectation. The sensitivity of palm oil prices to this bearish data has declined, the phased bearish has been exhausted, and Malaysia's palm oil enters the seasonal production reduction cycle in November, combined with the recent expansion of the international soybean-palm oil price spread, the improvement of palm oil exports, the market focus may shift to the seasonal production reduction and inventory reduction expectation.

Recently, the Indonesian Mining Association has been requesting the Indonesian government to cancel the plan to implement 50% biodiesel (B50) by 2026, which has raised concerns about the smooth implementation of the B50 plan and the future demand for palm oil, causing the biodiesel theme to cool down. However, the Indonesian government is trying to solve the technical, capacity, funding, and raw material issues faced by the B50 plan. Once a problem is overcome, it will greatly increase the possibility of Indonesia continuing to increase the biofuel blending rate in the second half of next year, and the biodiesel theme may heat up again.

China soybean oil supply is loose.

This year, China's oil mills have imported a record amount of soybeans from South America for several months to avoid potential supply shortages. Customs data show that the total import of soybeans from January to October was 95.68 million tons, an increase of 6.4% over the total import of 89.94 million tons in the same period last year; the estimated arrival volume in November and December is about 16 million tons, combined with the current sufficient inventory of soybeans imported by oil mills, the weekly crushing volume of soybeans has continued to maintain above 2 million tons, and the production of soybean oil has continued to be high, resulting in a high commercial inventory of soybean oil and a sufficient market supply. However, terminal consumption is relatively weak, the pace of pick-up is slow, and at the same time, the growth rate of catering revenue has slowed down, and the overall consumption of edible oil is weak. Downstream traders and oil users are cautious about their purchasing mentality, mostly purchasing as they go, and the spot market is dull. As of November 4, the inventory of soybean oil reached 1.199 million tons, the highest level in the same period in the past 7 years.

Cost support is gradually solidified

Although the recent premium of Brazilian soybeans has gradually weakened, the strength of CBOT soybeans has offset the impact of the decline in the premium of Brazilian soybeans, and the landed and duty-paid price of Brazilian soybeans with a December shipment is 4052 RMB/ton, which has increased compared to before. The crushing profit of oil mills continues to be inverted, and the market focus is gradually shifting to the problem of the rise in the cost of domestic soybean imports and the recovery of crushing profit. In the downward trend of the fat sector, soybean oil shows strong resistance to decline, and the loss of crushing profit of oil mills suppresses the willingness to purchase, and there are still 2.8 million tons of soybeans to be purchased for the December shipment. Although China announced that it would resume the export qualification of three American grain companies to China starting from November 10, and would suspend some retaliatory tariffs, American soybeans are still facing an additional 10% tariff, which makes its price significantly less competitive than Brazilian soybeans with only a 3% tariff, which makes the market expect an upward adjustment in the future raw material cost, further consolidating the cost support below soybean oil, and the price of American soybeans hinders the willingness of our buyers to make large-scale commercial purchases, and the supply and demand structure of soybean oil in the future is expected to be tightened.

To sum up, the monthly USDA report this month is likely to increase the yield and exports of US soybeans and reduce the ending inventory, which will provide a bull narrative for soybeans. The domestic soybean crushing profit is in loss, and the import cost is rising, which supports the cost side of soybean oil. In addition, palm oil is entering a seasonal production reduction cycle, and the market is gradually turning to the expectation of inventory reduction. The palm oil market may gradually stabilize, and it is expected that the support for soybean oil will be further enhanced.

If you have any inquiries or purchasing needs, please feel free to contact SunSirs with support@sunsirs.com.