Price recovery from overdone sell-off?
Your Bi-weekly update on edible oils & fats by Aveno
July 14th, 2021.
Weather risk remains key
When possible, buyers have been sidelining on expectations of lower prices due to production increases in the last quarter of the year. But after the prices for oils declined significantly in the past weeks, they started to recover from an overdone sell-off. This mainly affected nearby positions, where stocks remain tight.
Earlier this month, a U.S. court ruling made it easier for small mineral oil refineries to get blending exemptions for renewable fuels. Later Argentina decreased their biodiesel mandate from 10 to 5%. A perfect illustration of high edible oil prices hurting an industry.
Weather concerns like heat stress on the Canadian rapeseed crop and delayed monsoon in India also supported prices.
MARKETS
Monthly average FOB export prices for unrefined oils.
Source: European Commission / IGC, Monthly average, close July 7th
Soybean oil
This Monday’s WASDE (World Agricultural Supply and Demand Estimates) report had few surprises and was fairly neutral. The USDA left most numbers unchanged but increased global soybeans ending stocks for the 2021/22 marketing year by around 2Mmt on account of higher opening stocks, which was above market expectations.
U.S. weather started to look more favorable and rains across the Midwest helped crop development. Weather conditions will continue to determine price developments as August is the key development period for soybeans.
In EU, only small quantities are offered at large premiums on nearby. For deferred, availability is improving, but prices remain high.
Palm oil
Stock growth below and exports above market expectations.
The palm oil price decline has been too soon and too steep and the market recovered on slow stock growth due to ongoing production setbacks in Malaysia and strong exports.
Palm Oil (MYR/T)
Source: Trading Economics
Resurging Covid-19 infections in Malaysia worsen the labor shortage problem and India, the world’s largest buyer of palm oil, restarted purchases of refined palm oil.
In order to combat food inflation India eased import restrictions for crude and refined palm oil till Sept.31st, the moment when their new crop oilseeds are expected to hit the market. Also, Indonesia’s reduction of export taxes triggered stronger export demand. Prices may remain strong because of low global edible oil stocks and palm's big discount against other oils.
Rapeseed oil
Hot and dry weather on the Canadian Prairies stressed the crop and the crop forecast was already revised downwards. Hopes for cooler weather and rains will have to materialize soon because, with very low stocks and high demand, there simply is no cushion to absorb production losses.
Lower Canadian production will result in less export availability of rapeseed to EU and supports rapeseed prices everywhere. The physical availability will continue to play an important role during the next season as ending stocks are near zero and biodiesel demand is expected to stay strong.
Sunflower seed oil
There was not much market activity as most of the market is covered up to and including September. New crop (OND) is trading at a discount, but buyers are hoping prices will drop further.
Overall, growing conditions for sunflowers seem to be good and despite low ending stocks on old crop, prices already dropped. Although sellers remain cautious as they remember last season’s situation when things went wrong in July. Weather risk remains key.
USD and mineral oil.
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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.