For decades, the economics of soybean crushing were straightforward: processors bought soybeans, extracted soybean meal - which accounted for most of the revenue - and sold soybean oil as a byproduct. Meal went primarily into animal feed, while oil went into food markets.

The economics worked because soybean meal paid for the crush, while soybean oil provided additional value.

That model, which prevailed for more than half a century, is rapidly changing.

The ratio between soybean oil and soybean prices on the Chicago Board of Trade (CBOT) reached 0.055 - the highest level in 55 years of historical data and well above the 0.03-to-0.04 range that prevailed through much of the past several decades.

At the same time, the soybean meal-to-soybean price ratio fell to 0.30, near the lower end of its historical range.

What does that mean in practical terms?

Soybean oil has become the product supporting crush profitability. Soybean meal, historically the main revenue driver, is increasingly playing a secondary role. Meal prices are rising as soybeans become more expensive, but the key driver of crush economics is now soybean oil.

The reason behind this reversal is clear: soybean oil has become an energy feedstock.

In the United States, the EPA established its largest-ever biodiesel mandate for 2026, at 9.07 billion gallons, nearly 70% above 2025.

U.S. soybean oil consumption for biofuels is moving toward approximately 18 billion pounds this year. NOPA soybean oil stocks stand at just 1.36 billion pounds, below expectations, reinforcing the view that the United States is absorbing nearly all of its domestic production, leaving little meaningful surplus for exports.

The marginal buyer setting the tone for U.S. soybean oil prices is no longer just the food industry. The energy sector has become a central force.

Global Vegetable Oil Markets Are Tightening

The transformation extends well beyond the United States.

Indonesia implemented B50 in July, the world's largest mandatory biodiesel blending program. The policy could remove between 15 and 16 million metric tons (MMT) of palm oil from the export market annually.

Climate risk is adding another layer of uncertainty. According to the original analysis, El Niño carries an 81% probability of becoming a very strong event between October and December, threatening Southeast Asian palm production, with lagged effects potentially extending into 2027.

Meanwhile, sunflower oil exports from Russia and Ukraine have dropped sharply amid escalating tensions in the Black Sea.

India - the world's largest importer of vegetable oils - imported a record volume of soybean oil in August, shifting some purchases away from sunflower oil and toward soy.

All these forces point in the same direction: stronger demand for soybean oil at a time when global vegetable oil supplies are constrained.

Brazil Is at the Center of the Market Shift

In Brazil's domestic market, the second half of 2026 consolidated a trend that had been developing since April: sustained increases in soybean meal and soybean oil prices, supported by several mutually reinforcing factors.

The first is the cost of crushing.

Soybean prices exceeded R$160 per 60-kilogram bag (132.3 pounds) at Brazilian ports in August, the highest level of the year, and remain elevated.

Crush margins in Mato Grosso fell nearly 12% in August to R$383 per metric ton, the lowest August level in three years.

With approximately 85% of the crop already marketed and soybean availability becoming increasingly restricted, processors report growing difficulties sourcing raw material. In markets such as Uberlândia, companies have paid above parity levels to secure supplies.

The second factor is exports.

Brazil was on track for its largest soybean export year on record in 2026, with the January-through-October vessel lineup pointing to approximately 102 MMT.

Soybean meal exports are following the same trend. Shipments were 47% above year-earlier levels in some months, while export premiums reached record highs. October reached +31 on the offer side, the highest level recorded for that position.

As a result, supplies that otherwise could serve Brazil's domestic market are increasingly being absorbed by international trade.

Biodiesel Remains a Missing Demand Catalyst in Brazil

The third factor is biodiesel - or, more precisely, its absence as an additional catalyst for domestic soybean oil demand.

Brazil's B16 biodiesel blend, which under the Fuel of the Future Law was expected to take effect in March 2026, remains delayed.

Technical feasibility testing at the Mauá Institute of Technology is expected to produce a final report sometime between February and August 2027.

Meanwhile, bimonthly fee negotiations between producers and fuel distributors continue to close at negative or marginal levels.

During the September-October round, fees ranged from -150 to zero, approximately R$150 above the previous two-month period but still below industry expectations.

Margins for biodiesel plants were negative in 17 of the previous 23 weeks.

The delay in B16 is keeping Brazil's domestic soybean oil demand below its potential while compressing margins throughout the supply chain.

Soybean Meal: The Shortage Is Already Here

Soybean meal was the strongest-performing soybean product during the quarter, gaining 14%, compared with a 13% increase in soybeans and a 9% rise in soybean oil.

Unlike soybean oil, the rally in meal is being supported by a shortage that is no longer prospective. It is already affecting the physical market.

Buyers in northeastern Brazil report company-owned trucks waiting in lines outside processing plants, unable to pick up product that has already been purchased.

Major processors are effectively out of the spot market, providing no price indications and accepting no new sales.

In the MAPITO production region, spot availability is almost nonexistent.

Soybean meal offers across central-northern and northeastern Brazil are already trading above R$2,300 per metric ton, with indications from some processors reaching as high as R$2,600 per metric ton.

The outlook for the coming weeks - and potentially months - remains biased toward higher prices until harvesting of the new soybean crop begins around mid-February 2027.

Even amid recent volatility at the CBOT, where soybean meal traded between approximately $339 and $357 per short ton in September, Brazil's domestic market has consistently shown that declines in Chicago do not necessarily translate into lower local prices.

Export premiums are absorbing the difference, allowing domestic prices to remain firm.

Soybean Oil: A Slower Rally, but the Same Direction

Soybean oil prices are rising more gradually: 2% over the past week, 4% over 30 days and 9% for the quarter.

The pace has been slower than soybean meal because the supply dynamics are different.

While soybean meal is experiencing an acute shortage, soybean oil is facing intermittent availability, with buyers remaining cautious. Many are purchasing only enough to cover immediate needs while also looking for alternative vegetable oils.

But the underlying direction remains the same.

As soybean crushing gradually slows because of reduced soybean availability and tighter processing margins, domestic soybean oil supplies are likely to decline over the coming months.

September price indications from major companies already show some origins with no available supply, while market contacts report increasing difficulty sourcing soybean oil consistently.

What Comes Next for Soybean Markets?

The U.S.-Iran war - now in its seventh month with no clear resolution in sight - has kept crude oil above $100 per barrel and diesel prices at record levels.

Xi Jinping's expected visit to Washington in late September could accelerate Chinese purchases of U.S. soybeans and provide additional support to the soybean complex.

The September USDA WASDE disappointed market participants who had expected tighter U.S. ending stocks, but underlying demand fundamentals remain firm.

At the same time, El Niño threatens Southeast Asian palm oil production precisely during the period between crop cycles.

Demand has moved to a new level. The supply response will not arrive until the 2027 crop, while weather risk is filling the gap.

For buyers who need to secure soybean meal or soybean oil over the next several months, the market described in this analysis shows few signs of meaningful relief before February.

Chicago volatility is likely to remain high and could create pricing and purchasing windows. Those periods may provide opportunities for disciplined buyers to secure both price and physical supply before shortages deepen.

Waiting for a correction large enough to produce significantly lower prices would, under this market scenario, amount to betting on a relatively unlikely outcome.

Soybean oil is no longer the inexpensive byproduct of the soybean crush. It has become a key component of the global energy matrix - and Brazil, whether it intended to be or not, is now at the center of that transformation.

By Gabriel Viana, Market Analyst at Safras & Mercado

Editor's Note: This article was originally written in Portuguese by Gabriel Viana, Market Analyst at Safras & Mercado. AgroLatam's editorial team translated and adapted the article for English-speaking and U.S. agricultural markets, while preserving the original data, analysis and market perspective.