United States Boosts Share in South Korea’s Soybean Oil Market

South Korea continues to be a key agricultural market for U.S. exporters; it is the fifth largest market reaching over $6.8 billion in 2017. With livestock, grains, and horticultural products leading the way, South Korea has also rebounded from a relatively lean period, importing over $200 million in soybean oil and $600 million in all oilseeds and products.

In particular, the soybean oil market has been a great success story for U.S. agriculture. Korean imports of soybean oil have been largely supplied by price-competitive Argentina, followed by the United States and regional suppliers such as Vietnam and Thailand. Historically, the United States has maintained a relatively small market share, reaching 23 percent in 2015/16. In 2016/17 the U.S market share jumped to 45 percent, which translates to an additional $80 million increase in exports compared to 2015/16.

Several factors have contributed to the higher U.S. share. The domestic market is quite competitive and price sensitive, but recent FAS reports show that end users are becoming more appreciative of the qualitative characteristics of U.S. soybean oil, such as taste and color. Most notably, the golden color of U.S. soybean oil is a key factor in U.S. products being preferred over Argentine, which reportedly have a red tint. Additionally, due to the United States-Korea Free Trade Agreement, U.S. producers have an increasing edge in tariffs over their Argentine counterparts, as Argentina faces a tariff rate of 5.0 percent compared to the 2.2 percent for U.S. exporters. Soybean oil tariffs will continue to decrease until phased out in 2022, underpinning the price competitiveness of U.S. products. While this may seem small in percentage points, it can be a key decision factor in the crude soybean oil market where margins are thin.

On the global level, the dynamics of the soybean oil market may change. Rapidly changing policies, especially in the European and U.S. biodiesel markets, could alter incentives for Argentine soybean oil producers and increase competitive pressure in the Korean market. However, the promising first quarter of MY2017/18 (Oct/Sep basis) for exports of U.S. soybean oil, coupled with the aforementioned favorable micro- and macro-economic factors, suggest another strong year for U.S. soybean oil exports to Korea.

Aquaculture: A Growing Opportunity for Soy

Fishmeal is considered a premium feed ingredient due to its nutritional value and ease of digestion for most animals, especially in aquaculture. The energy and protein content of fishmeal makes it a very coveted product in the feed ingredient market, which is also reflected in its high price. Due to the nature of fishmeal production, which is limited by catch quotas and weather trends, prices of fishmeal correlate closely to the level of output. Prices have had an inverse relationship with Peru fishmeal production, as it is the largest producer in the world. Hence, global fishmeal prices rise when Peru’s production is falling, and drop when production is rising.

Recently, however, fishmeal prices have been tracking more closely to that of soybean meal. Fishmeal prices are increasingly independent of corresponding changes in global fishmeal production, especially after 2014 where prices surpassed $2,000/ton. In addition, fishmeal prices have been showing a steady decline, averaging around $1,300/ton in 2017, which closely follows the downward movement in soybean meal prices.

A large part of this change in price dynamics is due to newer methods that are being introduced to utilize soybean meal in aquaculture, such as pelletized soybean concentrate and intensive pond aquaculture (IPA). IPA allows high yield, year-round production of aquaculture, which has in turn increased the demand for fish feed. As global aquaculture production growth outpaces the availability of fishmeal supplies, soybean meal has been fulfilling the need for alternative protein feed ingredients, especially after promising results from trial runs conducted by USSEC and researchers. The U.S. Food and Drug Administration's 2017 approval of taurine in fish feed, which allows augmenting plant-based feed with crucial ingredients for aquaculture, also opens up new opportunities for soybean meal in aquaculture.

This trend can be also seen in the steady reduction in the global fishmeal/soybean feed ratio, adjusted for protein content. Based on USDA data, global soybean meal feeding was roughly 10 times of fishmeal feeding in 1987, now it is estimated to be 50 times more in 2017. The same market shifts can be found in leading fishmeal consuming countries as well, such as China and the European Union. With an increasing global supply and rising affordability, soybean meal seems to be increasingly more popular in aquaculture, as supported by USDA data showing rising consumption.

Due to its unique characteristic of high protein and strong appeal in niche markets, demand for fishmeal appears to be firm. Going forward, however, limited growth in fish catch, improved applications of soybean meal, and relatively low prices are expected to increase opportunities for soybean meal exporters.


Global oilseed production is forecast lower this month at 579 million tons. Soybean production is down in Argentina, Bolivia, and India, more than offsetting higher Brazil production. Production estimates for cottonseed are up slightly, with a larger crop in China more than offsetting a lower crop in India. Sunflowerseed production is down slightly on smaller prospects for South Africa. Soybean exports are down this month, with lower U.S. exports more than offsetting larger shipments for Brazil. Global ending stocks for soybeans are down this month, with lower production counterbalancing smaller trade. The U.S. season-average farm price for soybeans is unchanged at $9.30 per bushel.


U.S. export bids in January, FOB Gulf, averaged $375/ton, up $1 from the previous month. In comparison, FOB Brazil Paranagua averaged $384/ton, unchanged from last month. FOB Argentina Up River averaged $365/ton, down $3 from last month. Prices in the United States recovered slightly as commodity prices rose due to bullish macroeconomic sentiments and currency expectations.

For the week ending January 25, U.S. 2017/18 soybean export commitments (outstanding sales plus accumulated exports) to China totaled 26.2 million tons compared with 33.3 million a year ago. Total commitments to the world are 43.6 million tons, compared with 50.4 million for the same period last year.