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Soybean Oil Value Surging as Meal Value Declines
In Feb. 1998, soybean oil accounted for nearly 40 percent of
soybean product value, or 41 percent more than a year earlier and
the largest share since Sept. 1995. Key factors underlying the
rise in oil's share of soybean product value include below normal
global carry-in stocks of vegetable oils and prospects of a
further decline in oil stocks. Declining oil stocks are expected
in response to continued expansion in global oil usage coupled
with the lagged effects of El Nino on palm oil production. In
addition, a record large soybean harvest in South America will
continue to depress meal prices.
The inverse correlation between oil and meal prices will lead to
lower meal prices as oil prices continue to rise. With expanded
oilseed supplies, lower soybean meal prices will likely boost
meal usage and crush. Crush expansion will also boost oil output
and eventually help to moderate oil prices. However, the positive
correlation between soybean and soybean meal prices point to
lower soybean prices which will reduce the incentive to expand
soybean plantings. The record large South American oilseed output
now being harvested, together with some increase in U.S. oilseed
plantings this spring sets the stage for further oilseed stock
recovery and lower oilseed and meal prices in 1998/99 assuming
normal U.S. yields. However, the soybean oil/meal price ratio
will continue above average until stock recovery in the United
States, as well as abroad is assured.
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