China tripled its import of palm oil & European disappointing rapeseed production

We noticed increased imports of vegetable oils and animal fats into China, India, Pakistan and Bangladesh: representing 3.18 billion consumers or 41% of world population. This is expected to continue into the 2019/20 marketing season and will support oil prices.

It was reported that, in august, China tripled its imports of palm oil, a key ingredient in mooncakes. A mooncake is a Chinese pastry traditionally eaten during the Mid-Autumn Festival, in September and October. During the festival for lunar appreciation and moon watching, one of the more important Chinese festivals, the delicacy is offered to friends and relatives during celebrations. China is importing more oil to compensate the lesser domestic crush of rapeseed and soybeans due to lesser demand for meal for animal feed (African Swine Fever problems) and China also imported sun and soybean oil from Ukraine.

The sunflower seed oil market continued its downward momentum as with improved seed availability selling interest outweighs buying interest and buyers have been quiet over the last few weeks which pressured prices. For the high oleic sun oil market it is too soon to say which direction that will go and if the new crop production can keep up with the growing demand. Especially after a season with near zero carry over.

With disappointing European rapeseed production this season, imports remain key to price evolution. Rapeseed prices continued to increase, widening the premium over sunflower seed and soybeans. Imports from Ukraine can only temporarily ease the shortage pain and analysts expect still higher prices in the coming weeks and months. Little relief is expected from Australia which has no carry over from the old crop and which also faces a disappointing crop (drought).

After a slight increase the average EU butter price dropped to 363€/100 kg, (-0.3% vs last month, -16.5% since January and -35% compare to last year). We also witnessed a decrease of butter prices in Oceania (-3.9%) and in the U.S. (-5.9%). Butter in Oceania is now slightly cheaper than in the EU (4000 vs 4022 $/t).

Soybean oil markets remain difficult as the US-China relationship casts a big shadow on the situation and there is uncertainty on the size of the new crop in North America. This year’s carry out at the end of august is estimated at 28 million tons, compared to 12 last year and 8 million tons in 2017. In Argentina biodiesel producers are upset over the government’s unilateral move to freeze biodiesel prices which negatively impacts producers, even causing them to shut down. We already saw less biodiesel production and increased exports of soybean oil. South America is also preparing the sowing in of the next crops.

Brent Price: $63.20 per barrel

Petroleum prices go up or down depending on which news of the day outweighs the other: pessimism about the health of the global economy or a slowdown of shale oil production in the U.S. which could trigger a price rally (“in need higher oil prices or the global market will soon be under supplied”…) or a ministerial reshuffle in Riyadh. But, so far, nothing yet brought back a real bullish sentiment in the petroleum market.

Trump would like a weaker USD but the Euro seems to stabilize around $ 1.10 and some analysts even forecast the Euro to depreciate further to $ 1.07 in the next 3 months because there is still a 2.6% interest difference between both currencies and because the Euro is no longer undervalued vs the dollar…