Soybean oil price set to rise in 2018 due to US biodiesel anti-dumping policy

The price of soybean oil could increase sharply in 2018 as a result of US anti-dumping action against vegetable oils for biodiesel produced by Argentina and Indonesia, according to forecasts by data analyst specialists Informa Agribusiness Intelligence.

US action to impose countervailing duties against these countries on imports of soybean oil could push up the cost of popular processed foods like mayonnaise by up to 10%, Informa Agribusiness Intelligence claimed. A policy-driven rise in soybean oil prices could also push up demand for alternative biofuel feedstocks like canola oil and palm oil.

Global price of biodiesel

Earlier this year the US Department of Commerce (DOC) initiated an investigation into allegations that Argentina and Indonesia illegally subsidised domestic biodiesel sold into the US market. If the allegations are true, the DOC could introduce an antidumping duty (AD) and countervailing duty (CVD) which would significantly increase the price of soybean oil used for biofuel (in 2016 US imports of biodiesel have risen sharply to 677 million gallons).

If tariffs are imposed, the decline in imports will mean the US market will need to increase production significantly to meet the fuel volume requirements set out by the Environmental Protection Agency (EPA).

Informa Agribusiness Intelligence projects that soybean oil usage in biodiesel production could increase by 1.7 billion pounds from the current forecast to 8.1 billion pounds in 2016/17 and 3.3 billion pounds from the current projection to 9.825 billion pounds in 2017/18.

Cost of processed food set to increase

One of the most important products derived from soybeans is soybean oil, used as a large component of vegetable oil in the west due to its relatively low cost.

Informa Agribusiness Intelligence said it expected that the price increase of this key ingredient could mean products with a significant amount of vegetable oil could potentially increase in price by up to 10%.

To put this in wider context of competing vegetable oil ingredients, Informa predicts that for the 2017/18 year, out of a market of 191 million tonnes, global soybean oil usage will be 56 million tonnes whereas canola will remain at 28 million tonnes.

Alternative feedstocks come to the fore

The production of corn oil is relatively fixed, but if biodiesel feedstock prices rise sufficiently, the economics of corn oil production could rise to a level that would encourage production.

In a statement, Informa Agribusiness Intelligence said that it recognises this could play a major part in alleviating supply tightness in feedstock supplies. An increase in corn oil usage in biodiesel production is one of the more likely outcomes of the imposition of tariffs for soybean oil. Informa Agribusiness Intelligence predicts that, as feedstock supplies become tight, palm oil, cottonseed oil and sunflower oil may be utilised increasingly in biodiesel production.

“This year is a crucial year for the soybean oil market, that could see tariffs on biodiesel imports into the US have far reaching effects on the global biofuel and food markets,” said Tore Alden, ‎Senior Commodity Analyst covering oilseeds at ‎Informa Economics.  

Alden added: “While the global market for soybean oil in food, consumer products and biofuels creates a complex picture, we are likely to see an increase in the price of soybean oil across the board if the DOC were to impose tariffs on biodiesel imports from Argentina and Indonesia, and increased usage of other alternative vegetable oils as a result.”

This story was written by Liz Gyekye, editor of Biofuels International.