Markets

Palm oil

In Malaysia, palm oil futures sank to their lowest level in more than a month, below 4000 Ringgit/t, despite a sharp drop of palm oil stocks. After pricing itself out of the game palm oil became again more competitive and Malaysian exports to China and India are slowly picking up. The Indonesian market is still more tight and more expensive.

The market structure changed considerably: the inverse faded to become fairly flat as we enter the higher production season and hope for stock building grows. The sensational price drop may be a bit overdone (as was the price increase) and markets may rebound; the proof of the pudding is in the eating. If exports keep rising faster than production the stocks may never go up…. A lot will depend of the price evolution of competing edible oils and of petroleum prices. And there is talk and concern over hot weather in producing area’s which might still negatively impact production….

Soybean oil

In the US, oilseed prices remained under pressure from the arrival of the South American harvest and abundant domestic stocks. Although strong domestic demand allowed soybeans to maintain a higher price, as renewable diesel production provides strong demand for soybean oil and other feedstocks, including animal fats and corn oil.

But the soybean complex is weak, staying under pressure from South American competition and the progress of sowing in the US where soybean planting is off to a good start. The USDA reported that 8% of the crop was already in the ground as of April 21st, which is twice as much as the 5-year average of 4%. Planting intentions this year increased 3% to 86.5M acres. Forecasts of rain and colder temperatures could however delay fieldwork. Exports from the US remain weak with Brazilian offers more than $0.35/bushel lower than FOB Gulf prices.

Soybean prices got a little support from a loss of production in Argentina where lately it’s been much too wet. After the historic drought last year, the return of rains, end of last year, allowed a strong recovery in oilseed production but too much is not good at all!

The Buenos Aires Grain Exchange reported that crop conditions have been steadily falling since the beginning of March. Bean maturity has been slowed by the rain and pest and disease pressure continue to weigh on crop development. Also, rains make it difficult to go out and harvest, which leaves a maturing crop exposed to more moisture. As of April 24th, only 25% of the bean crop had been harvested. Wet conditions continue to be a factor moving forward.

In any case the Argentinian crop will be revised downwards and it would be good to see the Conab and USDA estimates for Brazil coming align. So far it looks like without clear numbers or direction the market may continue to drift and funds may continue to sell and increase their short position.

Rapeseed oil

Since mid-April, seed prices dropped in the wake of falling palm oil prices. Imports from Australia into France at the start of the month, already weighed a bit on prices, and a weaker soybean complex and a drop in petroleum prices reinforced the trend. But as rapeseed is vulnerable to every nervousness surrounding petroleum prices (and therefore biofuels) they react to any hiccup like the new mounting tensions in the middle east. That and a more uncertain rapeseed production outlook in EU limited losses.

Fears that the cold weather with excessive rainfall and frost in some regions of France, Germany and Poland could negatively affect the rapeseed harvest supported prices. The cold snap early last week and the return of rain forecast for the next two weeks threaten all European winter crops. Temperatures from Poland to large parts of France dropped below 0°C for several days. There were reports of winterkill in the Baltics, Romania had dry conditions at planting and the whole EU planted acreage is abt. 5% lower than for the 2023 crop. The cold also came over a crop in early development stage making it particularly vulnerable. There are regions where rapeseed plants have been flooded for three weeks, just when they were flowering.

EU rapeseed production estimates for this year are being reviewed downwards by anything between 1 and 2Mmt to 18-19Mmt vs 20Mmt last year. This drop in production will have to be offset by higher imports from the traditional suppliers Ukraine and Australia.

A lack of rain in parts of Canada during the sowing period is also a cause for concern. In Australia, on the other hand, a LaNina weather event (after dryness from El Nino) gives hope for record harvests…. But that is still many months away.

Rapeseed Oil prices were less impressed with dropping palm oil prices and rape oil is now at a premium over palm, soy and sun oil. MJJ is the end of season and the market remains naturally inverted versus new crop period ASO. Spot positions might be hard to cover as most old crop production is sold out.

Sunflower seed oil

Sunflower seed oil prices got some support as the supply push of seed and oil decreases due to declining inventories towards the end of the season. And at some import destinations crude palm oil has again become more appealing than crude sun oil imports. So finally, also sun oil suffered from pressure from a weak soybean complex and dropping palm oil prices.

It is still unclear, and too early to say, what the seed supply situation will be like in the 24/25 season compared to the 23/24 season. Some analysts see an increased supply, while others fear a reduction in seed supply. EU, Ukraine and Russia are still in planting mode while the Buenos Aires Grain Exchange just announced the completion of Argentina's 2024 sunflower harvest. This is 3.6Mmt, abt. 22% less than the previous harvest mainly due to a smaller planted area.Some fields left standing (delayed by rain) won’t change the current estimate.

Linseed oil

Regarding the additional sanctions against Russia and Belarus for agricultural products (increased import duties), the planned decision date of April 24th has been pushed back to the second half of May. The Commission did approve the proposal which must still be approved by the Council with a qualified majority. (“In the Council of the EU, government ministers from each member-state meet to discuss, amend and adopt laws, and coordinate policies. The ministers have the authority to commit their governments to the actions agreed on in the meetings.”). According to observers following the case, the final decision should take effect on July 1st. Still lying on the discussion table are possible transitional measures to provide an opportunity for importers to develop alternative supply chains. Meanwhile prices of linseed increased and oil remains unquoted pending more certainty on the matter.

Petroleum

Energy markets found some support from positive stock markets and positive EU data on improving economic sentiment. But the market also got some bearishness to chew on following a rise in global petroleum inventories, as allegedly crude afloat oil stuck on the seas due to disruptions in the Red Sea, got unloaded. And disappointing economic growth in the US also weighed. 

In recent weeks, Brent crude prices had climbed above $90/barrel when Israel and Iran launched missiles and drones at each other. But prices then fell back to $85 as the market considered the latter as just muscle flexing more than anything else. But finally, the potential geopolitical risk of a coming Israeli invasion of the southern Gaza town of Rafah drove prices back up to $89.50.