Soybean oil, palm oil and rapeseed oil futures prices take a collective breather
"The rally in oils and fats varieties will not just quietly end like this; after consolidation, the probability of a medium-term rise is very high." Wang Huan, a grain and oil trader in Hubei, told the Futures Daily reporter that the collective surge and pullback in the futures prices of China's three major oils yesterday was only temporary, and the speculation over low oils and fats market inventories and the coming El Nino weather is not over yet.
Since the rebound began on April 10, the medium-term upward trend in domestic soybean oil, palm oil and rapeseed oil futures prices has been very clear, and the open interest and daily trading volume of the above three varieties have also increased noticeably, showing a fairly perfect upward pattern of volume-price coordination. Among them, the cumulative gain in the futures prices of the Dalian soybean oil and palm oil benchmark 1509 contracts reached 500-600 yuan/tonne, with open interest and daily trading volume of the two varieties rising in tandem, while the cumulative gain in the futures price of the Zhengzhou rapeseed oil benchmark 1509 contract was around 300 yuan/tonne. However, the good upward momentum of oils and fats varieties suddenly stopped yesterday. Has some major influential factor emerged in the market?
According to the reporter's understanding, international palm oil spot and futures prices have recently risen continuously, first boosted by market speculation that El Nino weather will appear, second affected by higher international soybean oil prices, and third because some palm oil producing countries raised palm oil export tariffs, making the market bullish on later prices. In addition, international crude oil prices broke through the key level of 60 USD/barrel and held firm, which also strengthened the market's enthusiasm for speculating on the concept of vegetable oil-based biodiesel.
China is a major importer and consumer of palm oil, soybean oil and rapeseed oil. The arrival of summer has brought China into the peak season for palm oil demand, and coupled with the currently low inventories of China's three major oils, the market's desire to buy the bottom in oils and fats is relatively strong. Driven by rising international oils and fats prices, domestic oils and fats prices have risen overall. Whether this trend can continue still depends on later movements in international oils and fats prices, especially palm oil prices, while changes in the supply-demand relationship in the domestic oils and fats market also greatly affect the development of the market.
Analysts believe that, analysing the development trend of the international oils and fats market, the El Nino weather phenomenon that the market is paying close attention to and speculating on has so far had no impact on palm oil production in Southeast Asia. Malaysia's palm oil production increased substantially in March and April, which weakened the bullish impact on oils and fats prices that the possible appearance of El Nino weather might create. The market has also developed some doubts about the likelihood of El Nino weather appearing, and some investors holding long positions with substantial profits have begun to close out and wait and see.
"Analysing the development trend of the domestic oils and fats market, with the increase in arrivals of oils and oilseeds, domestic oils and fats market inventories will shift from a tight balance to a loose balance. If one also considers that summer is the overall off-season for consumption in the oils and fats market, then although palm oil prices may strengthen due to higher demand for it, most oils and fats varieties will weaken due to loose supply and weak consumption," said Liu Jin. From the perspective of oil mills, because soybean meal and rapeseed meal prices are at historic lows, the seesaw effect between oil and meal will appear, and oil mills supporting oil prices will become the new normal, giving some support to oils and fats futures prices. The narrowing price gap between domestic and international vegetable oils, the modest profit for traders on imports, the reduction in financing-oriented imports of domestic oils and fats, and the fact that commercial inventories of vegetable oils remain at historic lows will also have a bullish impact on oils and fats prices.
Wang Huan believes that oils and fats prices rising a bit and then falling a bit is for the sake of rising better in the future. The market needs time to analyse and digest the bullish factors, and once market expectations are confirmed, the "collective breather" in oils and fats prices will also end.