2021 on the horizon


2021 on the horizon

Your Bi-weekly update on edible oils & fats by Aveno
December 18th, 2020

Bullish outlook for oils & fats.

Despite COVID-19-related losses in GDP (gross domestic product) and lower energy prices, many Agri-commodities rallied. This was driven by monetary stimulus bringing speculators to Agri-markets looking for alternative investments and a hedge against inflation. But also, weather impacts (La Nina/dryness) around the globe and strong rebounding demand, particularly from China, supported prices. Vegetable oils firmed with palm leading the way as we experience simultaneous tightness in the 4 major vegetable oils.

Source: European Commission / IGC, Monthly average, close December 17th 

Olive oil

The Spanish harvest started but rains slowed it down and these showers can have a negative impact on quality. Analysts expect an average olive oil production of about 1.5-1.6 Mmt. Prices are currently much higher than last campaign, mainly due to the fact that Tunisian oil production is expected to decrease sharply after last year's record harvest, and the Italian harvest will also be below average this year. Significant price corrections are not expected. 

Sunflower oil

Will be tight until next crop coming October. Meanwhile some relief may come from Argentina where dry weather impacted plantings and production estimates are now being lowered. Russia imposed an export tax to curb domestic food inflation (30% on exports, between 9th January and 30th June) and exports of sun oil from Ukraine to China continued. Dwindling European demand may later lead to price corrections as buyers shift away from expensive sunflower oil. ‘Oil World’ thinks demand in EU could be reduced by as much as 700.000 mt! 

Soybean oil

Analysts report China’s pig herd recovered to 90% of its prior to the African Swine Fever pandemic level and it’s expected to return to normal in early 2021. This means “more soybean meal demand”. 

Soybean oil prices find support from, weather related, steadily decreasing harvest estimates in South America and fast-decreasing stocks in the U.S. Not to forget that a very big chunk of the coming Brazilian crop has already been sold. 

Rapeseed oil

Fundamentals remain supportive with mixed ideas on demand developments for food and fuel/biodiesel, following Covid-19 restrictions in EU. There has been some switching out of sun to rape and China has been shipping out crude and refined rapeseed oil. Also, China and Australia are in “political-trade dispute” so they may well boycott Australian rapeseed products, leaving more for export to EU. Firm soybean, palm and sunflower oil support the price. 

Groundnut oil

Further Chinese imports of groundnut products contributed to a tighter supply despite a declining consumption in the rest of the world. This year EU imports are down from about 70.000 mt to 60.000 mt of groundnut oil! Very tight market. 

Palm oil

Although not historically cheap, palm is still the cheapest oil. We are entering the low production months, bottoming out in February, to then slowly pick up again. Stocks remain at historic low levels with continuing production concerns. 

Indonesia increased its variable export levy ($213 vs 58) for palm oil to help finance its B30 biodiesel scheme. The difference between palm oil and gasoil prices, the so called POGO-spread is historically high. Fulfillment of the B30 program results in less palm oil exports to a world with insufficient supplies of vegetable oil. 

USD and mineral oil.

EUR 1 = USD Change from 1 Dec. 2019 to 18 Dec. 2020 
Source: ECB 

The Euro continues to appreciate at levels not seen since April 2018. Support comes from positive vaccine news, hopes for a Brexit-deal, demand for riskier currencies and the prospect of additional stimulus in the US. The trend is up and some analysts believe the euro will trade at $1.25 in the months ahead. But as always: “the future ‘s not ours to see” and materializing fundamental economics will dictate currency rates. 

Brent is trading above $51/barrel, the highest since early March, on same hopes as above… But demand and price are still far below pre-COVID-19 levels. Reports says Asia was ahead of the curve in recovering from the virus and “we see record-breaking refining demand in China and India”. This raises expectations of a rapid increase in crude oil demand, as vaccination programs roll out in Western economies. We’ll see, when, that happens and if OPEC can manage or balance production. 

Brent price/barrel change from Dec. 2019 to 18 Dec. 2020

Source: Trading Economics

It is AVENO’s privilege to do business with you. 

Thank you for your continued support throughout 2020 
and wishing you a safe, healthy and 
prosperous 2021!

Aveno's market update and bi-monthly bulletins 

There is some complexity to the business we operate in. To help understand the business and to help navigate in a challenging environment, Aveno has launched a series of publications. The bi-weekly market update informs our business relations about the changes in the edible oils and fats environment. The bi-monthly broadly informs its targeted audience about the edible oils & fats market. 

You can find all previous updates on: https://www.aveno.be/search/label/newsletter

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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 bring 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 an 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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Aveno NV - The one stop shop for all your Oils and Fats: 2021 on the horizon
2021 on the horizon
Aveno's BiWeekly market update on edible oils and fats
Aveno NV - The one stop shop for all your Oils and Fats
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