Weakness in weather sensitive market.
Your Bi-weekly update on edible oils & fats by Aveno
June 11th, 2021.
Soy-sun moving in opposite directions.
High prices are an incentive to grow more linseed in Russia, Kazakhstan and North America. And we’ve seen similar moves for other oilseed crops around the globe. Production of soybeans, rapeseed and especially sunflower seed are expected to rise this year. At the same time, we are in an early ‘weather market’: dry and hot weather in the U.S. led to nervous price reactions.
Last year the sun crop looked good until July. Then all turned sour! So, we do face crucial growing months and a weather risk premium will remain priced in until it’s clear that (delayed) crops materialize as anticipated.
Not much changed in the past weeks and not much is expected to change in the following weeks. End of season stocks remain low and hopes are on stock recovery by abundant oilseed crops and higher palm oil production. For deferred positions prices are easing and market inverses are becoming less steep i.e., prices on nearby are moving closer to prices on deferred. Coming from recent highs, edible oil markets feel a touch weaker but overall markets are still expensive.
Very noticeably sunflower seed oil is leading or weighing on the way down. But soybean oil has been an upward price leader, mainly due to its usage in biodiesel in the U.S. Booming global edible oil demand and tightening soybean oil supplies kept futures on high levels.
Biodiesel
Oil World recently projected this year’s global biodiesel (incl HVO) production at 48.56 Mmt or 2.1 Mmt more than in 2020! Growth comes from mainly the U.S. and Brazil, but also Indonesia and China: the latter will be producing more UCOME (used cooking oil methyl esters) for export to EU and in Indonesia the export tax on palm oil helps to overcome the price difference between Palm Oil and Gas Oil (the POGO spread).
MARKETS
Monthly average FOB export prices for crude oils.
Source: European Commission / IGC, Monthly average, close June 9th
Soybeans
Weather nervousness in the U.S. occurred as earlier ideal planting conditions of wet and cool weather turned hot and dry. And there was talk of a lower Brazilian crop and increased Chinese demand. Then lower palm and sun also weighed on soy. Price of crude soybean oil on June 9th was $0.7159 per pound or $1580/mt. Presently U.S. soy oil prices are much higher than ‘FOB up river Argentina’ and EU levels.
YTD U.S. crude soybean oil price evolution in USD per pound
Source: Macrotrends
Palm oil
Palm oil traded lower, below 4000 ringgit/mt again, on less demand domestically, from India and EU and on expectations of higher production and stock build in the next months. However, production recovery so far was modest and some demand may come back as covid-19 recedes…
Crude Palm Oil price evolution (MYR/mt) cl June 10th
Source: Trading Economics
Rapeseed oil
The market expects bigger rapeseed crops but global supply will remain tight as demand is strong. Crop prospects are looking better in Canada and Australia and the EU crop prospects also improved. But the EU crop conditions are 2-3 weeks behind normal which delays harvesting and spills over old crop tightness into August. Latest USDA analysis foresees global rapeseed production to increase 3.5% to 74.05 Mmt this season. In Russia the agriculture ministry reported that plantings exceeded 110% of the plan on 1.4 million ha, versus 1.2 million planted end June last year!
Sunflower seed oil
The 2021 outlook of the EU Commission anticipates improved yields at an overall average of 2.39 mt/ha. This means a 20% year on year increase for the EU crop. The planted area is about 4.4 million ha which is similar to last year but the French area is smaller though and it is not clear how much of the crop will be classic or high oleic. Russia and Ukraine are also expected to have bumper crops if weather cooperates. Russian farmers increased the sunflower area even to 9 million ha, versus 8.3 million ha sown last year.
USD and mineral oil.
Gas oil price evolution (USD/mt) cl June 10th
Data source: Reuters
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Every two weeks we will share an update about edible oils and fats. You can find all previous updates on: https://www.aveno.be/search/label/bi-weekly
Disclaimer
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.