CHICAGO: U.S. soybean oil futures rallied to a record high on Monday, with tight supplies in focus due to strong demand from the biofuel sector as drivers return to roads following COVID-19 related shutdowns.
Chicago Board of Trade soybean oil for July delivery was up 0.24 cent at 71.58 cents per lb late morning. Prices peaked at 73.74 cents, surpassing the previous 2008 record, during the overnight trading session.
Rising vegetable oil prices are contributing to the highest global food prices in more than a decade, raising livestock feed costs for meat plants and threatening the potential of biofuels to help governments meet climate emissions goals.
New-crop soyoil contracts were posting even bigger gains, supported by concerns that the supplies will remain tight if the harvest of the soybean crop that is currently being seeded in the U.S. Midwest disappoints.
Soyoil futures have jumped 71.3% this year due to dwindling supplies of soybeans that have left end users scrambling to keep up with global demand for food and animal feed products, let alone greener fuels like renewable diesel.
The U.S. Agriculture Department has forecast global supplies of soybeans will fall 10.3% to a five-year low of 86.55 million tonnes by September.
The stocks situation will continue to pressure prices in the coming months as processors struggle to find enough supplies to keep plants that crush soybeans into oil and meal operating at desired levels.
Companies including U.S. agricultural commodities trader Cargill Inc have announced plans to invest in expanded soybean processing capacity, but increased crushing is contingent on more availability of oilseed crops.
“If the crush rates don’t keep up pace, things are going to get a little tight in the balance sheet come August,” said Terry Reilly, senior commodity analyst at Futures International. “It really all depends on producer selling and the availability of soybeans.”