The sharp increase in soybean prices that began in June and peaked in early September was carried more by soybean meal prices than by soybean oil prices, according to University of Illinois Agricultural Economist Darrel Good. From the June low to the September peak, January 2013 soybean futures increased by 43%, January soybean meal futures increased by 51% and January soybean oil futures gained 20%. Soybean oil futures are now back to the level of early June, while soybean futures are 13% above the early June level and soybean meal futures are 21% higher.

“For the 2012-2013 marketing year, the USDA expects soybean oil prices to remain weak relative to soybean meal prices,” Good says. “The price of crude oil at Decatur, Ill., is expected to average 2.26 times the price per pound of 48% protein meal. The ratio of average prices was 3.08 during the 2010-2011 marketing year and 2.64 last year. In nominal terms, the average price of soybean oil is projected in a range of 51-55¢/lb., compared to an average of 51.9¢ last year and 53.2¢ during the 2010-2011 marketing year. On the other hand, the average prices of soybeans and soybean meal are projected to be substantially above the averages of the previous two years,” Good says.

Good says that the relative low price projection for soybean oil reflects prospects for weaker demand than forecast for soybean meal. “Soybean oil exports during the current marketing year are projected at 1.2 billion pounds compared to 1.464 billion pounds exported last year and exports of 3.233 billion pounds in 2010-2011,” Good says.

Good reports that the U.S. soybean oil exports are expected to be limited by an increase in palm oil exports and by competition from larger Argentine exports of soybean oil during the last half of the marketing year. While exports during the current marketing year are expected to be down by nearly 14% from exports of a year ago, shipments and sales have been relatively large early in the marketing year. Shipments during the first seven weeks of the marketing year were more than 3.5 times larger than the very slow pace of a year ago. Unshipped sales as of Nov. 15 were 2.8 times larger than unshipped sales on the same date last year.

“The large early export pace is supported by the small South American soybean harvest earlier this year and will likely slow after the first of the year as confidence in the 2013 South American crop increases,” Good says. “The prospects for very small inventories of U.S. soybean oil by the end of the marketing year, however, underscore the importance of a rebound in South American production.”

Domestic consumption of soybean oil for purposes other than biodiesel during the current marketing year is projected at 13.1 billion gallons, 310 million gallons less than consumed last year. Consumption is expected to be limited by larger supplies and consumption of other vegetable oils, particularly cottonseed oil and peanut oil.