Global soybean futures have been on a downward trend recently, and this pressure has at times impacted the wider oilseeds complex, including rapeseed.
AHDB’s Gabriel Odiase takes a look at what is underpinning the market dynamics.
In the short term, improved weather in the US has boosted the supply outlook, while longer-term, weak demand and ample supplies could push prices down further.
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Improved Weather in the US
Recent weather improvements in the US have been beneficial as the soybean crop progresses through its key development stage.
Rain in the past few weeks has eased concerns over soybean yields, which were initially under pressure from hot and dry conditions.
On Monday, the USDA’s crop progress report showed a slight uptick in the proportion of the crop rated good or excellent compared to the previous week.
The weather forecast for the next seven days indicates cooler-than-normal temperatures in key soybean-producing areas in the US. This is favourable for crop yield and could boost overall output.
Weak Global Demand
Another factor putting downward pressure on prices is weak demand from the biofuel industry.
In the US, soybean processors are feeling the impact of biofuel producers shifting to cheaper alternatives like used Chinese cooking oil.
The National Oilseed Processors Association reported a 4.4% decline in soybeans crushed in the US in June compared to May.
This was below market expectations, although still historically high due to the expansion of plants and construction of new facilities over recent years.
Concerns about the weakening US economy and slowing economic growth in China are also important indicators to watch for consumer purchasing trends.
An Oversupplied Market
The forecast of a larger global soybean crop this year has also been a key factor keeping prices lower. The USDA expects soybean production by major exporters (including Argentina, Brazil, Paraguay, and the US) to reach 351.4 Mt in the 2024/25 marketing year, surpassing the previous five-year average of 306.9 Mt.
Meanwhile, ending stocks are forecast to reach 76.3 Mt compared to the previous five-year average of 61.6 Mt.
Impact on the UK Rapeseed Market
Rapeseed futures have historically tracked movements in the global soybean market.
Therefore, as weather conditions in the US improve, we could see some pressure on rapeseed prices. In the longer term, heavy supplies will likely limit any price support as well.
However, the current crisis in the Middle East is something to watch, as it could affect crude oil production and lend some support to the vegetable oils market.
Additionally, with lower rapeseed output from Europe and Australia, rapeseed might extend its premium over soybeans further.
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