By Brian Harris, Global Risk Management Inc.

As soybean oil futures prices have taken on a bit of a calmer tone over the last several weeks, end users are starting to reassess what “value” should look like going through the rest of 2021. While the domestic soybean crushing community seems to have a better handle now on what the “Food vs. Fuel” dilemma should look like going forward for balancing their long-term margin needs, there are still plenty of shorter-term issues to be resolved. The Canadian canola crop has been severely cut back by drought, Malaysian and Indonesian palm oil production is still being hampered by COVID-19 related labor issues and all while global supplies of vegetable oils in general remain the tightest in years. Thankfully, the U.S. soybean crop looks to be moving through the critical “pod set” phase with generally favorable weather conditions sans the northern tier.

The higher net base costs of the “new normal” in shortening and oil prices is still the longer-term mantra given the advent of soybean oil use for Renewable Diesel but overall, the trade is finally starting to equalize the situation from both a basis and futures perspective.

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