Chicago, Sep 25 - Tentative signs of the U.S. economy pulling out of a severe recession will help bolster demand for soyoil, a widely used cooking oil whose supplies have ballooned this year, analysts said.
"We are still battling the recession, reduced restaurant traffic and areas like that which have traditionally been a swing factor in demand," Bill Nelson, analyst at Doane Advisory Services said.
U.S. soyoil stocks were 3.041 billion lbs (1.38 million tonnes) in August, nearly 20 percent higher than last year but 8.5 percent less than in July, the U.S. Census Bureau said Thursday.
Demand for the United States' most popular vegetable oil should increase at least slightly as consumers return to restaurants, although aversion to so-called transfat will continue to limit soyoil use in baking and frying.
"It's a slow process," said David Maloni, principal analyst at the American Restaurant Association. "You're going to see modest improvements in demand as you see modest traffic come back."
Consumers returning to restaurants may find small portion sizes, limiting oil use, Maloni said. An order of French fries, for example, may decline to 4 ounces from 6 ounces.
"You'll probably see some improvement in demand but the trend for the restaurant industry is going to be smaller portions and value prices," he said.
Big soyoil supplies have helped keep prices competitive with other oils, such as palm oil, for use in salad dressing.
"After a dip we saw this year, because of the economy, I think it's possible we could see an increase in usage next season," said Anne Frick, oilseed analyst with Prudential Bache Commodities.
But the transfat issue is not going away, as consumers continue to turn to healthier oils.
"We're feeding more mouths in the United States, but that transfat issue has people looking at other oils as substitutes that don't have the transfat issues that soybean oil has," Nelson said.
SOYOIL EXPORT DEMAND INCREASING
A small South American soybean harvest should push more business to the United States, after droughts reduced soy harvest in Argentina, the largest soyoil exporter.
Combined new- and old-crop U.S. soyoil net export sales last week were the largest in nearly 11 years, according to U.S. Agriculture Department data released on Thursday.
Meanwhile in Argentina, sales of manufactured agricultural goods, which include soyoil and soymeal, fell 35 percent from a year ago.
"One of the things that will help absorb some of the stocks, especially during the first half of the new-crop season, is replacing or augmenting shrinking supplies from South America," Frick said.
"Not only do they have less beans to crush but, of the oil they produce, more is going to go into their domestic biodiesel production."
Export sales of soyoil should be especially robust in the coming weeks as prices fall during the potentially record U.S. soybean crop of 3.245 billion bushels.
But the sheer size of the crop may slow any reduction of soyoil stocks, said Charlie Sernatinger, analyst with Fortis Clearing Americas.
"I honestly don't think we're going to draw down the stocks. The crush is just too big," Sernatinger said.