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Veg oil Prices still high

European and UK soybean oil prices moved sharply higher

over the past week on continued concerns over the tight

supply and strong demand in the EU. There is talk of

increased usage in biodiesel as soy oil is still the cheapest

vegetable oil at a time of increasing crude (mineral) oil

prices, at one point to pre-covid levels, which makes

biodiesel margins more attractive. The strength in EU

and UK markets is despite a choppy US soy futures market

over the past week. Chicago soybeans futures rose

at the end of last week, its highest level since June 2014,

supported by concerns over low stocks and the lack of

current supplies due to harvest delays in Brazil.

However, futures came under pressure towards the

of last week after lower-than expected

weekly sales data, which showed soybean

exports were down around 62% from the previous week.

Although this could be because of China being absent

from the market due to New Year celebrations. Gains could

also be limited by expectations that US production could

strongly rebound this year so the outlook at the end of

this year could be completely different.


However, the market is currently focussed on the fact that demand should now be switching to South America as a huge

export pace out of the US, combined with significantly lower than expected production, as pushed US to critically low

levels. The Brazilian harvest is extremely late with the harvest only 12% complete compared to 30% at the same time last

year with vessel line ups growing week by week due to the delays and causing a major supply problem. At the same time

weather conditions in Argentina are causing some major concerns as there are reports that some areas are the driest since

1990 and there is now talk of another reduction in production estimates in the coming months. However, Argentina is

still holding onto record stocks from the 2020 harvest, so this will ultimately ease the lower production assuming this will

finally hit the market. There is talk of a better-than-expected crop in Brazil, due to higher yields, but overall production

could be left unchanged depending on the revised estimates.

Market attention will switch to weather conditions in the US and we should see an official crop estimate later this month.

There has been talk that soybean acreage could rise by 6.9 million acres to 90 million which will have a big impact on

production, assuming a “normal” year in terms of weather. The market will remain firm until we see an easing of supply

problems in South America and help improve supplies to the market.

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