Chicago soybean oil rose to its highest level in more than six months, driven by expectations that India will buy more after proposing to open parts of its agriculture market to cheaper US imports.
India agreed to cut or eliminate import duties on a slew of US agricultural products, including soybean oil, according to a joint statement on the framework for an interim trade deal released late Friday in the US. That followed an announcement made last week by US President Donald Trump that India would buy over $500 billion of US products, including agriculture.
The most actively traded soybean oil contracts on Chicago Board of Trade surged as much as 1.9% to the highest since July during intraday trading, extending last week's rally after Trump first announced the deal.
Photo Credit: Bloomberg
India is the world's largest edible oil importer, buying around 16 million tons of seed oil annually, mainly palm, soy, and sunflower oil from producers in Southeast Asia and South America. Soy oil imports from the US are relatively marginal, totaling around 200,000 tons in the January-November period last year.
The trade deal with the US could allow American supplies to gain market share from other major exporters and curb demand for competing edible oils. Soy oil prices in the US may rise further once details of the deal are finalized and the agreement could see India scaling back purchases from South America, according to Sandeep Bajoria, chief executive officer of Sunvin Group.
In addition, recent guidance updates on US tax credits for biodiesel producers may have also contributed to the oil's recent strength. It will “discourage use of biofuel feedstocks originating outside of US, Canada and Mexico,” said Matt Darragh, Grains & Oilseeds Analyst at Kpler.
Meanwhile, soybean meal saw its biggest drop in two weeks as the pending demand for US agriculture products from India weighed on the by-product of the oil. The most traded palm oil futures on Bursa Malaysia Derivatives settled slightly higher at 4,162 ringgit ($1,058) per ton.
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