Round and round, up and down, we go


Round and round, up and down, we go

Your Bi-weekly update on edible oils & fats by Aveno
September 10h, 2021.


Although the mere facts should be guiding us and not the whimsy of the day, if one thing characterized our markets in the past months, it’s been big price swings following the issues of the day.

We’d like to determine our own agenda, not allowing ourselves to be swayed by the issues of the day over the weather, covid-19, the economy, politics, biofuel policies, production or consumption forecasts, etc. Still, everyday brings its new surprise and after peaking, markets have been moving up and down. Some up, some down, also sideways, but most without decisive direction.

Food (and other) inflation: a globally growing concern.

Earlier this month, in the U.S., the EPA (Environmental Protection Agency) recommended reducing biofuel blending mandates below the 2020 levels. But nothing has been confirmed yet. Last Monday, for its next auction, Brazil again chose to reduce the minimum biofuel content in diesel to 10% from 13% previously. What will happen in Indonesia in 2022 remains unsure but everywhere authorities are more inclined to lower biofuel goals when they realize its effect on edible oil stocks and prices. But sudden changes in policies also make demand unpredictable and contribute to volatility!

Happy new season!

The overall edible oils production outlook remains poor and supplies are likely to tighten further. Leaving markets tight well into next year. Supply uncertainty kept prices well supported. Newly added, are concerns over deteriorating oilseed production prospects in India.

But there is hope that, in the new Sept. 21 – Aug. 22 season, global production might exceed consumption. And that, in the coming months, generally, prices might trend lower. For this to happen we are counting on a record Brazilian soybean crop of 144 Mmt, of which planting starts mid-September, to be harvested around march. And we need good weather. And we need pressure coming from the (delayed rape, sun, soy) harvests.

At the time of writing, we haven’t yet seen the results of the USDA report on Friday nor the new palm oil stocks report. All eyes will be on these numbers. We’ll see.


Soybean oil

On worries that supplies may begin to outstrip demand and on favorable weather forecasts for the U.S. Midwest, Chicago soybeans futures trended lower to below $13/bushel in September, the lowest since December 2020. Unpredictable Chinese demand and U.S. biodiesel mandates remain the key market drivers. Hurricane Ida damaged export facilities and is blocking goods which also weighs on prices. With the U.S. harvest upcoming, market attention will soon turn to South America (with focus on Brazil) where weather concerns (La Nina) remain and some regions show soil moisture deficits.

Palm oil

Speculation on demand from India supported prices. More important will be the evolution of stocks in Malaysia which are expected to having recovered due to higher productions. We will see on Friday how the market digests these new numbers.

Linseed oil

The global linseed crop in 2021 is expected to be at a multi-year low due to drought in the main producing regions: Kazakhstan, Canada (yoy -28%) and Russia. Any origin linseed oil prices ex-tank Rotterdam rocketed to $2130!

Olive oil

Prices of olive oil have been on the rise because of good demand but also on concerns that dry conditions in the olive growing areas of Spain, Italy and Greece, good for 60% of global production, could curb production.

Rapeseed oil

On the bright side: ABARES (Australian Bureau of Agricultural and Resource Economics and Sciences) estimated the coming Australian rapeseed crop at a new record level slightly over 5 Mmt! Thanks to the farmer’s response to high prices (bigger area) and good weather. But rapeseed is likely to remain very tight this season.

In Canada weather forecasts are now showing rain, which is no longer welcome with the harvest coming. The hot and dry conditions led to a 30 - 40% lower than anticipated crop.

In Rotterdam crude rapeseed oil prices broke records as strong demand and a tight international oilseeds market supported EU rapeseed oil prices. Good EU demand for food and non-food oil also supported price increases. This season, the EU-27 demand for food is estimated at 2.4 Mmt vs a non-food demand of 6.7 Mmt.


Sunflower seed oil

Price pressure from the bumper crop has not yet arrived. Reserved farmer selling of seeds has been slowing down the price decline though sun oil is at a large discount to soy and rape. There is big pending demand around the world. The expected bearishness of the bumper crop may be premature as what we lost in Canada might be made up by extra sun, but then it adds no extra volume….

USD and mineral oil

The stronger € somewhat softens the price of imports. Worries of inflation grow in the U.S. and EU and the general mindset of central banks is slowly but surely evolving to stop printing money.

Crude petroleum found support from lower output after Hurricane Ida idled 75% of offshore production in the Gulf of Mexico. This was partly offset by China's intentions to release state oil stocks to ease prices for Chinese refiners and last Wednesday the EIA (energy information administration) cut its 2021 global demand growth forecast.

Please reach out to your regular AVENO contact for further inquiries. Always at your service.

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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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