26 June 2020
The spread of COVID-19 and consequential lockdown measures have led to a nominal impact on soybeans. Soybean oil, one of the main by-products of soybean processing, has seen a drop in consumption, primarily due to the impact of the pandemic on restaurants, who are more substantial users of vegetable oils than at-home consumers. Likewise, as fuel demand has dropped, there has been a reduced consumption of biodiesel – another soybean by-product. Despite this, both impacts have been marginal and not considered game changers for the price outlook throughout the pandemic and going forward.
The worst affected areas so far have been the countries with larger biodiesel programmes. The loss of biodiesel demand has been a function of the loss of total fuel usage. As biodiesel is blended with traditional diesel having fewer vehicles on the road also drives down biodiesel demand. Demand loss has primarily come from the US, which has the largest soy oil usage for biodiesel. Brazil, where biodiesel demand has been growing sharply in recent years, has been impacted; and indirectly, Argentina’s biodiesel export programmes to Europe has all but stopped.
Another by-product of soybean is soymeal, the protein component of animal feed. With meat demand around the world having dropped on the back of lockdown measures, demand for soymeal related feed has followed. Livestock production margins have fallen sharply, reducing the incentive for producers to raise poultry and hogs, amongst others. Simply put, fewer animals require less soymeal.
Chris Gadd, Macquarie agricultural commodities analyst