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 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.