The market for soybean oil (labeled “vegetable oil” in the supermarket) is looking cloudy; prices dropped beneath 33 cents per pound on Friday for the first time since October.
Bean oil is falling even as the price for soybeans has been robust. Demand for soybean meal, a livestock feed ingredient, has been strong, which has encouraged processors to buy more beans and crush them into meal. This crushing process separates the oil from the high-protein meal and has created an abundance of soybean oil.
Soybean oil is consumed widely in the food industry as a cooking oil, processed food additive, and as the basis for many salad dressings, mayonnaises, and margarines, but those sources of demand don’t typically rise drastically to soak up excess supply.
As a result, the soybean oil glut will likely need to be met by exporting the excess oil or converting it into biodiesel, a demand source that currently consumes nearly 20% of U.S. bean oil.