- scorpiusuk
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.