Nov 27 / Luiz Fernando G. Roque

Live with Experts - Soy Complex and Vegetable Oils - Highlights

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"Summary of the main points highlighted in our November's Live with Experts on the Soy Complex and Vegetable Oils markets"

Soybean Complex and Vegetable Oils Scenarios Update


Macro Overview

The global scenario following the US government shutdown continues to bring volatility and uncertainty to the markets. Before the shutdown, there was consensus that the Federal Reserve (Fed) would cut interest rates again in December, but the absence of inflation data (October CPI not released) and doubts about the real health of the US labor market changed this expectation.

  • Interest rates and exchange rates: Before the shutdown, the consensus was for a rate cut by the Fed in December. Now, the absence of inflation data (October CPI) and doubts about the labor market increase uncertainty, raising the probability that interest rates will remain unchanged. This keeps the Brazil-US interest rate differential stable, sustaining the real in the range of R$ 5.20-5.40.

  • Impact on Brazil: This exchange rate directly influences soybean producer prices (Chicago + premium + dollar). A stronger real reduces the incentive to sell, which may delay commercialization.

  • US-China agreement: The resumption of talks at the end of October provided support for Chicago. China purchased around 2.2 million tons of US soybeans between the end of October and the end of November, targeting 12 million tons by January. However, competitiveness clauses and a 13% Chinese tariff still limit the pace.

  • Strategic implications: Exchange rate volatility and uncertainty about interest rates impact hedging decisions and sales timing in Brazil. Players should monitor "Super Wednesday" (Fed + Copom) and dollar movements, as any surprise could alter export parity.


Soybean Complex

Global Scenario

The Soybean Complex is going through a period of divided attention, marked by weather uncertainties, doubts regarding supply, and geopolitical movements that impact prices and trade flows. The current dynamic is influenced by three main pillars: China as the driver of demand and returning to buying US soybean, the US with adjusted supply and resuming sales to China, and South America with the development of its new crop (with weather risks).

Soybean - World - Supply and Demand (M ton)

                                                                                                                                                                                                                                                                                            Source: USDA, Hedgepoint


China

China remains the main driver of global demand, but is adopting a strategy of high stock that reduces the urgency of purchases. Despite this, the country projects record imports and an increase in crushing in 2025/26, even with negative margins. Recent purchases of US soybean apparently indicate a move that is more political than economic.

  • Stock Policy: China maintains its restocking strategy, with ending stocks close to 44 million tons, ensuring four months of consumption. This reduces the urgency to buy and price sensitivity.

  • Imports and crushing: Imports are projected to reach 112 million tons in 2025/26, accompanying an increase in crushing to 108 million tons (vs. 103.5 million tons in the previous crop).

  • Margins: Challenging scenario with tight margins for crushing, despite the volume commitment. Port stocks at historic highs are a limiting factor for demand.

  • Competitiveness: American soybean remains more expensive than soybean from Brazil or Argentina, even without considering tariffs. Chinese movement signals more political "goodwill" than economic advantage.

  • Strategic risk: If margins remain negative, the pace of purchases may slow, putting pressure on Chicago and premiums in Brazil.

China Soybean - Stocks and Stock/Use (M ton, %)

                                                                                                                                                                                                                                                                                            Source: USDA, Hedgepoint

Soybean - China - Supply and Demand (M ton)

                                                                                                                                   Source: USDA, Hedgepoint

Soybean - FOB Prices - Main Origins - in USD/ton

                                                                                                                                                                                                                                                                                            Source: LSEG, Hedgepoint


USA

The US harvested a smaller-than-expected crop, despite record yield, due to a reduction in planted area. Soybean exports fell, but crushing remains strong, driven by strong exports of soymeal and soyoil and a possible change in biofuel policy. Prices in Chicago are supported by the resumption of Chinese purchases.

  • Production: The USDA revised the 2025/26 crop to 115.8 million tons (down from the previous estimate), despite record yield. A reduction in the planted area (approximately -2.5 million ha) limited production potential.

  • Exports: Projection fell to 44.5 million tons (vs. 51 million tons in the previous crop). The current pace of export sales is approximately 7 million tons below the previous year, a direct reflection of China's absence until October.

  • Crushing: Historic record, supported by exports of soymeal and soyoil and expectations of an increase in the biofuel blend (EPA proposal still pending). If approved, the proposal could reduce soybean and soyoil stocks and increase meal stocks.

  • Prices: Chicago broke through the US$ 10-10.80 range, reaching US$ 11.30-11.40/bu, with room to reach US$ 12/bu according to regression studies regarding the stock/use ratio vs. prices.

  • Implications: Possible EPA approval could provide further support and momentum for soybean and soyoil prices (strong domestic consumption), but generate excess of soymeal (putting pressure on international prices). Soybean exports depend on China meeting its purchase target.

USA Soybean - Production (M ton), Harvested Area (M ha) and Yield (ton/ha)

                                                                                                                                                                                                                                                                                            Source: USDA, Hedgepoint

Soybean - USA - Supply and Demand (M ton)

                                                                                                                                   Source: USDA, Hedgepoint


Brazil

Brazil is heading for a record crop, despite the initial delay in planting. The weather, with the La Niña phenomenon, is a risk factor, especially for the South. Low domestic margins limit crushing and put pressure on premiums at this time, while exports remain strong.

  • Crop: Projected at 178 million tons for 2025/26, with room for adjustments. The stock-to-use ratio may rise from 3% to 5%, with more comfortable stocks. Exports are expected to close 2024/25 at a record level of 109 million tons, supported by Chinese demand.

  • Planting: Delays in planting progress caused concern, but the pace has improved in recent days (around 80% completed, only 4 p.p. below average). Despite the delays, there is no relevant historical correlation between delays and production losses. A greater impact is expected for the "second crop" of corn, which may have a reduced window for planting.

  • Weather: La Niña active until January (~69% probability), bringing drought risk to southern Brazil and Argentina. Possible above- al temperatures between December and January increase the risk of water stress, but no extremes are expected.

  • Domestic demand: Low crushing margins limit industrial appetite, putting pressure on premiums and basis. Slow sales: only 25% of the new crop sold.

  • Soymeal and soyoil: Growth potential, but there are challenges for meal exports (competition with Argentina and the US and EU deforestation policy). A further increase in demand for soyoil still depends on B16 (unlikely in an election year).

  • Strategic risk: Delays in planting are likely to lead to delays in harvesting, which could shift Chinese demand to the US until the end of January.

Brazil Soybean - Production (M ton), Harvested Area (M ha) and Yield (ton/ha)

                                                                                                                                                                                                                                                                                            Source: USDA, Hedgepoint

Soybean - Brazil - Supply and Demand

                                                                                                                                   Source: USDA, Hedgepoint


Argentina

Argentina surprised with high soybean exports in 2024/25, benefiting from higher Chinese demand and temporary tax cuts. For 2025/26, a smaller soybean area/production and a greater focus on corn are expected (due to falling margins), but the country should consolidate its leadership in soymeal and soyoil exports.

  • 24/25 crop: Production revised to 51-52 million tons. Surprising exports: 12 million tons (double the initial estimate), driven by higher Chinese demand (trade war) and temporary tax cuts (September).

  • 25/26 crop: Trend toward smaller soybean area (tight margins), with estimated production of 48.5 million tons. Exports should "return to normal" (4-6 million tons). La Niña may affect crop development, requiring monitoring.

  • Soymeal and Soyoil: Argentina is expected to regain prominence in 2025/26, with exports close to 30 million tons of meal and 7 million tons of soyoil.

  • Implications: Competition with Brazil will be intense in the meal market, especially if the EU moves forward with environmental restrictions. In addition, the US is also likely to be a major competitor (EPA proposal could increase US meal supply).

Argentina Soybean - Production (M ton), Harvested Area (M ha) and Yield (ton/ha)

                                                                                                                                                                                                                                                                                            Source: USDA, Hedgepoint

Soybean - Argentina - Supply and Demand

                                                                                                                                   Source: USDA, Hedgepoint


Palm Oil

Indonesia & Malaysia

Indonesia and Malaysia remain global leaders, with production and exports trending upward. India and China are expected to increase imports in 2025/26. La Niña may affect crop quality and logistics in Southeast Asia (with possible above-average rainfall), while spreads between soyoil and palm oil are narrowing again, reducing the competitiveness of palm by-products.

  • Production and exports: Upward trend in Indonesia and Malaysia in 2025/26. India and China remain the main drivers of demand for palm oil from Southeast Asia.

  • Weather: La Niña may bring above-average rainfall, posing more of a logistical risk (flooding) than a productive one.

  • Prices: The spread between soyoil and palm oil narrowed again after peaking in August, reducing the competitiveness of palm oil by-products. Regarding the relationship, it may change in 2026, requiring attention.

  • Implications: Any logistical disruption could cause volatility in prices and spreads, affecting margins globally.

Palm Oil - World - Supply and Demand (M ton)

                                                                                                                                                                                                                                                        Source: USDA, Hedgepoint

Prices Comparison - Palm Oil vs Soybean Oil (USD)

                                                                                                                                                                                                                                                                                             Source: LSEG, Hedgepoint


Bulls and Bears

Bullish factors

  • Agreement between the US and China: new purchases of American soybean

  • South American weather market: La Niña alert

  • New EPA proposal could boost crushing in the US in 2026

  • US soybean stock tighter in 25/26 (lower production)

Bearish factors

  • Possible new record crop in South America

  • Tight crushing margins in China may limit demand

  • Low margins in Brazilian crushing may affect domestic demand


Final considerations

The soybean market is entering a period of transition, supported by Chinese demand and weather uncertainties, but with significant downside risks if the South American crop confirms record volumes. Constant monitoring of weather, the pace of Chinese purchases, and the EPA's decision in the US will be decisive for short-term pricing.

The palm oil market, on the other hand, presents a scenario of relative stability in the short term, but with significant risks that could alter the dynamics of prices and global logistics. Attention should be paid to the impacts of La Niña on logistics in Southeast Asia.

Finally, both markets require attention to environmental issues and sustainability policies that may affect exports, especially to European markets.

Link - November's Call

To watch the full November's Call on the Soy Complex and Vegetable Oils markets, click on this link.

Market Intelligence - Grains and Oilseeds


Written by Luiz F. Roque
Luiz.Roque@hedgepointglobal.com

Reviewed by Thais Italiani
www.hedgepointglobal.com

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