KANSAS CITY, MISSOURI, US — Nearby contracts of soybean oil futures in Chicago and canola oil futures in Canada traded to record highs in late April amid a combination of supply-limiting events and ongoing strong demand. Volatile futures prices declined last week, but values remained historically high.

The US Department of Agriculture in its Oilseeds: World Markets and Trade report in April forecast global 2021-22 vegetable oil (nine oils in total) at 212.04 million tonnes, up 0.3% from 2020-21, consumption at 208.92 million tonnes, down 0.1%, and ending stocks at 26.07 million tonnes, up 8%. Despite forecast higher ending stocks, ongoing COVID-related logistics delays and more recent export disruptions have pushed vegetable oil prices to new highs.

Several factors have combined to send edible oils prices to record highs, including the war in Ukraine, the top sunflowerseed oil exporter; a ban on exports by Indonesia, the top palm oil exporter; slow planting of the US soybean crop; and strong global demand in part led by growing renewable diesel manufacturing in the United States.

For reference, palm oil is the largest volume edible oil produced (forecast by the USDA at 77.05 million tonnes in 2021-22) and exported (49.62 million tonnes), followed by soybean oil (58.97 million tonnes produced, 12.44 million tonnes exported), sunflower seed oil (20.39 million tonnes produced, 10.74 million tonnes exported) and rapeseed oil (28.49 million tonnes produced but only 5.53 million tonnes exported).

Indonesia, which banned exports of all palm oil products as of the last week of April, is by far the largest palm oil producer and exporter, accounting for 59% of global production and 56% of exports (Malaysia is second at 25% of production and 33% of exports). Most analysts do not expect Indonesia’s palm oil export ban to be long-lived because exports are so important for its economy. The ban was imposed to curb soaring domestic vegetable oil prices.

Ukraine and Russia together account for 56% of sunflowerseed oil production and 76% of global exports. Ukraine is second to Russia in production with 28% of global supply in 2021-22 but first in exports, accounting for 46% of the total. Ukraine’s ports were officially shut down last week but have been effectively shuttered since early March after Russia invaded Feb. 24.

China is the world’s largest user of vegetable oils, followed in order by India, Indonesia and the United States, where soybean oil is the most widely used.

The spot May Chicago soybean oil contract set an all-time high of 91.40¢ a pound on April 29 and rose 33% for the month of April. The price was up nearly 30% from a year ago. That increase pales in comparison with some other commodities such as wheat up 45% to 60% and crude oil up 65%, but far outpaces others such as corn and soybeans, both up less than 10% year over year.

Brian Harris, executive director and owner of Global Risk Management, Tampa, Florida, US, in a recent update noted the May/July soybean oil futures inverse had shot to 500 points with May a delivery month. Inverses tend to indicate tighter supplies ahead, he said, “as biofuel demand continues to expand while domestic soybean oil stocks likely peaked in April,” with fundamental and technical signals continuing to point to “firm prices ahead.”

Soybean oil’s share of the soybean crush (the equation of soybean prices relative to soybean meal and soybean oil values) “roared up through 50%” in the spot position during the last week of April, he said, which was the highest since the early 1980s.

“The spot domestic soybean board crush margins surged up past $2.50 per bushel as the industry continues to crush for soybean oil where gains have continued to outpace those of the soybeans,” Harris said. Typically, soybean oil’s share of the crush margin is in the 30% range. Soybeans traditionally have been crushed for meal, used as a high-protein livestock feed, with oil a byproduct.

Cash prices for edible oils also have surged, with basis levels firm even with record-high soybean oil futures prices. At the end of April, bulk soybean basis Decatur, Illinois, US, was up 28% from a year earlier, palm oil at US ports was up 60%, sunflowerseed oil, Midwest, was up 53%, and canola oil, Midwest, was up 35%. Amid tight supplies of the major edible oils, prices for other oils have soared as buyers sought replacements, with corn oil, basis Decatur, Illinois, US, for example, up nearly 70% from a year ago.

Globally, importers have had to shift sources to fill the gap from Ukraine and Indonesia. India’s oil use typically consists of 40% palm oil and 11% sunflowerseed oil. That country has boosted soybean oil imports by 30% over the past five months, with shipments from the United States in the past four months larger than the prior eight years combined, and shipments from Brazil 10 times larger than a year earlier.

Amid vast supply uncertainty, the near-term outlook for edible oils prices remains strong. Beyond that, demand for renewable diesel amid the building of new production facilities is expected to keep demand high for years to come, with some forecasting a need to boost US soybean planted area by a third to meet projected demand.