SunSirs: China Soybean Oil Market is constantly Falling, What will Happen in the Future?

According to the commodity market analysis system of SunSirs, starting from March 21st, the soybean oil market entered a downward channel, with prices continuously falling and bottoming out until mid April. The price dropped from 8,200 RMB/ton to 7,800 RMB/ton, a drop of over 400 RMB/ton, a drop of nearly 6%. On March 1st, the average price of soybean oil in the market was 8,260 RMB/ton. On April 16th, the average price of soybean oil in the market was 7,806 RMB/ton, a decrease of 5.5%.

According to the annual comparison of soybean oil prices at SunSirs, it can be seen that from January to April 2024, soybean oil prices have been oscillating at a low level, at a low level in the same period of nearly four years. Compared with the sharp rise and fall in 2021-2023, the market in January April 2024 was relatively flat, with mainly fluctuating fluctuations. On April 16th, the price of soybean oil was at its lowest point in four years, with a difference of 3,650 RMB/ton compared to the high point in 2022.

The main reason for the oscillation and decline of soybean oil in this round is the increase in imported soybeans from the supply side to the port, the concentration of South American soybeans listed on the external market, and the bearish sentiment suppressing the soybean futures market. The demand for terminal catering is sluggish, and the soybean oil market continues to hit the bottom, causing a slide.

Supply and demand forecast: With an increase in supply and a decrease in demand, soybean oil will continue to decline in the future.

Supply side: Starting from October 2023, the quantity of imported soybeans has been continuously increasing, with a total of 22.9 million tons imported in the fourth quarter, accounting for 22.5% of the total for the year. From January to March 2024, the quantity of imported soybeans was 18.578 million tons. Both the fourth quarter of 2023 and the first quarter of 2024 saw an overall low level of imported soybeans in the past year. The quantity of imported soybeans in the second and third quarters was at a relatively high level. Starting from late April, the supply pressure of raw materials still exists, which continues to suppress the soybean oil market and the rebound is weak.

Inventory: From January to mid April 2024, soybean oil inventory showed a downward trend, mainly due to the low quantity of imported raw soybeans. As of the week ending April 12th, soybean oil inventories have dropped to around 860,000 tons, the lowest level of the year. With the rebound of imported soybeans, the operating rate of soybean oil factories has recovered, and soybean oil inventories will also hit bottom and rebound. The increase in inventory limits the potential for soybean oil to rise in the future.

Futures: Since April, the soybean oil futures market has been fluctuating, with weak rebounds and oscillating declines. As of April 16th, the settlement price of the main contract for soybean meal was 7,612 RMB/ton, a decrease of 2.13% from the beginning of the month and 4.25% from March 21st. In late April, South American soybeans were concentrated on the market, while US soybean oil futures were weak. Malay palm oil production recovered, leading to bearish sentiment. The oil futures market had limited upward space in the future and will continue to maintain a downward trend. The futures market has limited support for the future soybean oil spot market.

Demand side: Starting from April, the overall performance of terminal catering demand has been average. With the rise of temperature, oil consumption has entered the off-season, coupled with the continuous decline in soybean oil prices, terminal manufacturers are cautious in purchasing, and the soybean oil market transactions are flat. The rigid demand has declined, and the downward trend of the soybean oil market in the future is difficult to change.

Agricultural product analysts from SunSirs believe that as we enter late April, the quantity of imported soybeans has increased, the supply of soybean oil has continued to increase, inventories have risen, futures prices have rebounded weakly, and the possibility of a large increase is low. Terminal demand has weakened, and the technical soybean oil market has declined. Both in terms of supply and technology, in the short term, the soybean oil market will mainly experience a weak downward trend, while in the long term, the potential for significant gains will be limited.

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