CBOT soybean oil futures plunge 3.19% amid oil-meal spread trading

Chicago Board of Trade soybean oil futures plunged 3.19% Oct. 7, recording their largest daily percentage decline since Sept. 11, amid a sharp divergence between soybean oil and soybean meal futures, a stronger US dollar and weaker crude oil prices.

CBOT December soybean oil futures settled at 67.68 cents/lb on Oct. 7, down 2.23 cents/lb, or 3.19%, from 69.91 cents/lb Oct. 6.

The sell-off coincided with a sharp divergence between soybean oil and soybean meal futures, consistent with pressure from soybean oil–soybean meal spread trading.

December soybean meal futures climbed $11/short ton, or 3.1%, to $365.80/short ton, while December soybean oil futures declined 3.19%, highlighting the contrasting price movements between the two soybean processing products.

The contrasting movements suggested a shift in relative pricing between soybean oil and soybean meal, with the sharp decline in soybean oil outpacing movements in the broader soybean complex.

The selloff also coincided with a stronger US dollar and higher US Treasury yields, adding to pressure across agricultural commodity markets.

Crude oil prices also declined Oct. 7, contributing to a weaker backdrop for soybean oil, which is widely used as a feedstock in biodiesel and renewable diesel production.

Market participants were also awaiting the US Department of Agriculture's Oct. 9 World Agricultural Supply and Demand Estimates report, which was expected to provide updated projections for US soybean production, yields and ending stocks.

South American soybean oil basis strengthens

The sharp decline in CBOT futures was partially offset by stronger soybean oil export basis levels in Argentina and Brazil.

Platts, part of S&P Global Energy, assessed Argentine soybean oil FOB Up River for November loading at $1,194.47/mt Oct. 7, down $18.29/mt from Oct. 6. The November basis strengthened 140 points to minus 1,350 points against CBOT December futures.

Brazilian soybean oil FOB Paranaguá for November loading was assessed at $1,207.69/mt, down $18.30/mt on the day, with the basis also strengthening 140 points to minus 1,290 points against CBOT December futures.

For December loading, Brazilian soybean oil FOB Paranaguá was assessed at $1,203.28/mt, down $18.30/mt, while the basis strengthened 140 points to minus 1,310 points against CBOT December futures.

The 140-point strengthening in South American basis levels offset approximately 63% of the 223-point CBOT futures decline, limiting the reduction in outright FOB assessments to approximately $18.30/mt.

Brazilian soybean oil for November loading maintained a $13.22/mt premium over Argentine FOB Up River, while Brazil's November-December forward structure remained inverted by $4.41/mt.