With vegetable oil supplies tightening worldwide, India, the biggest importer of edible oils, is ramping up purchases of US soybean oil.
Importing countries are increasingly turning to the US for commodities that are becoming scarce in other parts of the world. China has sharply increased its purchases of US soybeans this year as Brazil’s crop, the world’s largest, declines because of drought. Canada, too, has bought a record amount of US corn following the 2021 drought that wrecked its crops.
Global vegetable oil supplies are under pressure. Indonesia, the largest producer and exporter of palm oil, set export restrictions on the most popular edible oil to ensure adequate domestic supplies. Argentina is the world’s biggest exporter of soybean oil, but a second consecutive year of drought is degrading production forecasts. In addition, Russia’s attack on Ukraine reportedly has stalled shipments of sunflower oil to India from the world’s top producing and exporting region.
Prices for the various vegetable oils have been on an upward trajectory for over a year, which has boosted profit margins for oilseed crushers and processors. However, given the ubiquity of vegetable oils to most packaged food formulations, it has contributed to the crunch felt by consumers as food price inflation soars. Gro’s US Food Price Index, which reflects prices based on consumption of a wide range of food items, is up 29% from this time last year.
Since the October start to the marketing year, US total sales commitments of soybean oil to India total 142,576 tonnes. That’s four times the amount India purchased from the US in the whole of the previous year, and is approaching a previous annual record of 172,584 tonnes in 2008/09. India typically sources the bulk of its soybean oil imports from Argentina and Brazil.
World soybean oil stocks-to-use ratio, an important measure of supply availability, is currently at the tightest level in at least 20 years and continues to tighten as soybean production estimates in South America continue to erode.
India’s increased purchases from the United States are expected to further support US soybean oil prices, which have climbed 40% from this time last year. CBOT front month soybean oil futures are approaching 10-year highs.