On the international front, the U.S. Environmental Protection Agency's proposal to increase the 2026 biodiesel quota and adjust exemption ratios has driven global oil prices higher, with the impact extending to the domestic market. This, coupled with geopolitical tensions bolstering crude oil prices, has provided further support for the oil sector. Simultaneously, palm oil price increases widened the soybean-palm spread, acting as another driver for domestic soybean oil prices.
On the domestic demand side, pre-Spring Festival stockpiling demand intensified, with some oil mills scheduling deliveries into early February. Commercial inventories fell by approximately 15% compared to the previous month. Constrained rapeseed oil imports, ongoing inventory drawdowns, and inverted soybean-palm oil spreads have shifted market demand toward soybean oil, fueling robust domestic demand. Domestic soybean oil inventories have been steadily declining since Q4 2025, with inventory lows projected for March-April 2026.
On the supply side, Brazil's soybean output for the 2025/2026 season is projected to reach a bumper crop of 176 million to 181 million tons, easing domestic concerns over soybean shortages. Although soybean arrivals declined in the first quarter, the government supplemented supply through reserve auctions, with over 2 million tons sold and deliveries concentrated between January and April. This suggests no significant supply gap is expected in March-April.
Market outlooks vary among analysts. Some analysts maintain that the upward trend in the oil sector remains intact, with key focus shifting to Malaysian palm oil inventories at the end of January and February production/demand data. Others note that as domestic crushing volumes rebound and Lunar New Year stockpiling demand wanes, soybean oil supply pressure will gradually intensify, though global oil market conditions and domestic structural support persist. A third camp adopts a cautious stance, suggesting soybean oil prices have limited upside potential and may face downward pressure in the medium term.
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