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Near Term Palm Oil / Soya Oil Fundamentals

EDIBLE OIL (B – Trams) :The market is pricing in a major military conflict in the Black Sea region and traders will continue to monitor this situation closely . It may be difficult to follow through to the upside without more help from the weather or actual military action .

China plans to sell soybeans from its state reserves and also sell edible oils as part of a rotation of its oil stocks .

Palm oil hit a record high as escalating Russia Ukraine tensions has helped to support . In addition surging energy prices and an inflationary tilt to all food commodities has added to the bullish tone Read More…..

The one week forecast calls for decent rain totals for central Argentina and scattered , sometimes heavy rains in parts of southern Brazil . The 8-14 day forecast models show good rain amounts for northern Argentina and for southern Brazil but much of Argentina is dry .

This may be enough to ease crop concerns short term . Uncertainties over the long weekend helped to provide some support for the bounce Friday . Private exporters reported the sale of 198,000 tonnes of US soybeans delivered to unknown destination.

Argentina grain inspectors union indicated they will launch a 24 hour commercial strike Monday . A one – day occurrence will not be a difficulty , but if strikes continue , this could slow exports further . Traders have noted a surge in China and unknown destination purchases of US soybeans since January 1 and reached more than 2 million tons from China and 2.8 million to unknown destination.

Weekly soybean export sales totaled 2.89 million tons in the week to Feb. 10 , a 17 – month high . Weakness in the meal market was offset by new contract high for soybean oil on Friday . News that India purchased a record high 100,000 tonnes of US soybean oil helped to support.

World vegetable oil stocks are tightening dramatically and while there will be plenty of supply for the second half of the year , the short term tightness is significant . Inflationary fears have end – user buyers nervous , and it will be very important to see sharp adjustments lower in biodiesel mandates in order to avoid sharply higher pricing .

If so , and there are no more weather difficulties with the soybean crop in South America , the market may be in a position to see a more significant correction than what we’ve seen so far . However , Indonesia is taxing palm exports which can drive prices higher , in India is removing import taxes which may also support a further uptrend in vegetable oil prices .

If biodiesel targets are not adjusted lower immediately , the market will need to move to a high enough price level to reduce demand . Damage to date for the South America crops has been significant with Brazil down nearly 10 million tonnes , Argentina down 5 million , and Paraguay down 1.3 million from the recent update .

If these estimates prove true and world demand stays constant , world ending stocks for 2021/22 could drop to 76.5 million tonnes , which would be the lowest since 2013/14 . The stocks / usage ratio would drop to 20.7 % , which would be the lowest since 2001/02.