Uncertainty, bullish surprises and volatility.

Uncertainty, bullish surprises and volatility.

Your Bi-weekly update on edible oils & fats by Aveno
October 16th, 2020

Most markets turning firmer again.

As covid-19 continues to dominate, it became more and more apparent that markets have been misreading its impact and many are facing a different than expected reality. The continuing strong global demand for the two most produced oils, palm and soybean oil, has taken everyone by surprise. 


Due to money creation by the central banks to support the economy, all over the world commodities are seen as an alternative investment and inflation hedge, and more external money is moving into agri-markets. Even the Chinese central bank injects at least CNY500 billion per month its economy and inflation is allegedly the first reason why all commodities entered a bull market in Asia. In Argentina, farmers are only selling the quantities needed to cover running costs and prefer keeping their beans over worthless pesos. In the U.S. managed money funds increased their net long in soybeans to 244,000 contracts, close to the largest Long position of the past 5 years. 

The supply of the so called soft oils (rape and sun) is tight and La Nina is bringing dryness and nervousness about delayed plantings in South America and elsewhere. 

Markets are expected to move sideways for the coming period but as the world misjudged the impact of the first wave, the impact from the 2nd wave might be as much, if not more, surprising than the 1st corona wave. Uncertainty and volatility remain.

Source: European Commission / IGC, Monthly average, close October 15th

Soybean oil

The USDA reported the U.S. harvest 61% complete and came with a bullish surprise last Friday when they reported that the supply of soybeans has significantly decreased due to stronger than expected demand under the lead of China, from countries such as Egypt, Mexico, Pakistan, etc. 

Globally the market still seems balanced if all goes well but there is no room for any negative crop event. Parts of Brazil had some rain but not enough and planting progress remains a concern. In Europe, the soy oil market remains tight.


Canadian and Australian crops look good but the market remains tight and prices of rapeseed oil remained stable.

Sunflower seeds

The bullish surprise this year is in the sun market. Losses in the Black Sea harvesting area have been reported as high as a loss of 5 million tons of sunflower seed! Market remains tight and volatile. High oleic sun oil became more expensive in the last few weeks, but the premium over classic sun has considerably decreased vs previous seasons.

Corn oil

After demand destruction for corn starches and corn starch being replaced by wheat starches for economic reasons, the supply of “corn germs”, for crushing, from the starch industry dropped. Consequently the production of corn oil dropped and made corn oil prices explode. Then prices came down due to slighter better availability but prices remain at historic high levels. 

Linseed oil

Due to a smaller than expected production of seed and to China’s appetite for linseed products, prices of crude linseed oil ex-tank Rotterdam are at historically high levels: above those of coconut oil! Du jamais vu!

Palm oil

Palm oil had support from good demand for soybeans, tight rape and sun situation and good continuous palm demand from China. Support also came from supply concerns such as a yield decline (tons/ha) due to a lagging effect of past dryness, labor shortages, age structure of the trees, less fertilizer applications…. And all of this especially in Malaysia. In Indonesia we saw lower exports, better production and rising stocks. The Indonesian “Gapki” estimated for August a production increase of 13.7% , exports fell by more than 14% and stocks increased to 4,362 MT, the highest in 7 months.

Remains to be seen what Indonesia will do with its biodiesel mandates and when India will be back. As it is a given that the economy will come back and India has very low stocks. The Chinese appetite continues to surprise everyone and India may either take over or even add extra to that demand.

Market evolution in the past 2 weeks 

(January position, refined, in euro):

Sunflower seed oil increases with € 51/t. Palm kernel oil increases with € 10/t. Coconut oil increases with € 40/t. Soybean oil stays the same. Palm oil increases with € 8/t. Rapeseed oil decreases with € 6/t. EU average butter price week 42: € 335/100 kg is the same as last week.

USD and mineral oil.

Petroleum prices were pressured by concerns about fuel demand recovery, as a spike in coronavirus infections made several countries reimpose restrictions. But even if overall demand for transport fuels was and is suffering from covid-19 related demand destruction, demand for renewables slightly increases due to “climate policies”. Another covid-19 surprise is, that because there is less UCO (used cooking oil) on the market due to less out of home consumption, in EU this “double counting” biodiesel feedstock needs to be replaced by twice as much other vegetable oils!

I am thankful for laughter, except when milk comes out of my nose”

  - Woody Allen, American author, actor, musician and film director

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Unless otherwise mentioned the crude oil values quoted in these documents are prices landed in EU without import duties, handling, storage, financing, refining, packing, transport or any other cost related to bringing the product to market. They are used as market trend illustration. Substitution of oils is possible but different oils have different fatty acid profiles and are not all interchangeable for all applications. One can make biodiesel from all oils and fats but one cannot make mayonnaise from coconut oil. This document is exclusively for you and does not carry any right of publication or disclosure. This document or any of its contents may not be distributed, reproduced, or used for any other purpose without the prior written consent of AVENO. The information reflects prevailing market conditions and our present judgement, which may be subject to change. It is based on public information and opinions which come from sources believed to be reliable; however, AVENO doesn’t guarantee the correctness or completeness. This document does not constitute an offer, invitation, or recommendation and may not be understood, as advice. This document is one of a series of publications undertaken by AVENO and aims at informing broadly a targeted audience about the edible oils & fats market. AVENO’s goal is to keep this information timely and accurate however AVENO accepts no responsibility or liability whatsoever with regard to the given information.

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