veg oils prices levelling off

European and UK soybean oil prices have firmed slightly

over the past week with futures relatively range bound

after choppy trading with the market struggling between

continued Chinese demand and generally favourable

weather conditions in South America. In Europe, the

market has remained quiet with buyers remaining hand

to mouth waiting for market developments, although

biodiesel margins have improved recently with higher

crude oil prices. Fundamentally the market remains very

tight, with strong demand depleting global soybean

stocks with the US running at critically low levels.

The market is starting to move away from weather

conditions in South America to harvesting progress,

although it’s still relatively early days. Rains have come

too late for many areas, apart from some areas in

Argentina and may in fact delay the harvest progress.

There are reports, that due to late planting progress

(again weather related) could delay the main Brazilian

harvest by 2-3 weeks and cause continued tightness in

the market.

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The market is also starting to look at the planting conditions in the US and there are forecasts for a good recovery in

production based on an expected increase in planted acreage. However, traders believe that soybean prices need to

remain firm to prevent any potential acreage switches from beans to corn (or vice versa) as both markets are struggling

with critically low stocks. There are some forecast that US soybean plantings could be increased by around 8% from

last year to 36.2 million hectares or 89.5 million acres. This estimate would imply the second highest area on record,

only trailing the 36.5 million planted in 2017 but that was due to a loss in corn acres. However, once again, this will be

dependent on weather conditions this year as production has been hit over the past two years by adverse weather

conditions so nothing can be taken for granted.

According to a report last week, the line-up of vessels ready to load Brazilian soybeans is growing day by day and could

amount to 11 million tonnes this month. This implies rather long waiting times as actual loadings this month will trail

this volume probably by far. The world soybean market strongly depends on Brazilian and Argentine exports in the

next seven months as the US no longer in a position to supply any further due to record exports and domestic crush.

Although Argentine exports could be limited by continued political and currency issues but is already holding onto

record stocks from the last crop.

The market is now waiting for the next USDA supply and demand report.