CBOT soybean oil futures hit 12-year high, trades limit up

CBOT futures surged to the highest level since July 2008 on Thursday as it gained 4% in a single session and triggered a cooldown period, as the US balance sheet continued to tighten and as the country's President Joe Biden announced plans to halve US emissions.

The May contract surged 250 points to a contract high of 62.66 ct/lb and traded limit up, while the July contract was up just under 4% at 59.19 ct/lb.

CBOT soyoil futures were up for their eighth consecutive session, gaining over 20% in the past week as cold weather at the start of the US plantings season spread fears of persistent tight bean and corn supply over the next few years.

“The extended rally is due in part to follow through buying on the same fundamentals with weather and demand dominating the bullish sentiment,” Futures International’s Terry Reilly said in a client note.

The tight supplies in the US soy complex follow the surge in bean exports to China at the end of 2020 coupled with record crush rates on firm meal demand and booming soyoil demand as a feedstock in the US biodiesel sector.

“The renewable biodiesel story has already and continues to work its way into soybean oil,” Reilly added.

“Tightening of US soyoil availability is expected [in the coming months] as the US soybean crush will go down seasonally and demand is likely to go up ahead of US driving season,” Anilkumar Bagani, research head at Mumbai-based vegetable oil broker Sunvin Group, told Agricensus.

“There is a scarcity of alternate Canadian canola oil in the US markets, and thus soyoil has to meet the food and renewable fuel demand,” Bagani added.

The surge in CBOT soybean oil futures comes on the same day that US President Biden committed to halving US emissions by 2030, doubling the previous target, and paving the way for a further boost in US biofuel demand.

“Even without the announcement, the US domestic market is on fire, with refined soyoil offered at 3,000 [points] over [CBOT]… There is no oil in the market,” a swiss broker told Agricensus.

Market fundamentals for US soybeans have been tight in 2020/21, and new crop plantings have been estimated to be lower than originally expected by the USDA – at 87.6 million acres compared with 90 million acres originally expected – setting the scene for a tight balance sheet.

US farmers reported putting their first soybeans of the 2021/22 crop into the ground this week, but with the western half of the country suffering various degrees of drought, weather conditions will remain a factor to watch in the coming weeks.