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Vegetable oil prices still on the rise

European and UK soybean oil prices have moved higher

over the past week, with some months showing strong

gains in the week after another volatile trading week in

the futures market. Chicago soybeans futures were once

again trading around the $14.2 per bushel in March, not

far from a 6 and half year high of $14.6 per bushel reached

earlier this month due to concerns over the slow arrival of

new crop South American supplies and expectations of

increased soy oil demand for the use in biodiesel following

a new sustainability policy. Underlying support is still

coming from strong demand for soybeans, particularly

from China, although that has eased recently, which has

reduced world soybean stocks. However, there has been

some pressure coming from an increasing harvest pace in

Brazil, which is now seen at around 70% complete as well

as improved weather conditions in Argentina so demand

should now switch away from the US until later this year.

The market is now waiting for this week’s USDA planting intentions and quarterly stocks reports, due on Wednesday. This is quite a critical report for market direction in the short terms and whether there could be either a correction from recent sharp gains or the start of a prolonged rally, if estimates fall below market estimates. Weather conditions have had

a significant impact on most major crops over the past 12 months and soybeans are no exception. Soybean production estimates were lowered significantly in all major producing countries due to adverse weather conditions and at a time of strong world demand. Despite delays in the Brazilian harvest, production prospects seem to be rising but Argentina’s crop

is smaller than expected but has the benefit of record carry over stocks. Estimates for soybean acreage are seen at a record 90.317 million acres, up from the earlier Agricultural Outlook Forum estimate of 90.0 million and an increase of 7.233 million acres from last year. This would suggest a record production estimate of around 4.558 billion bushels (around 124 million tonnes) when using the harvested area projection of 89.274 million acres and the trend line yield of 51.1 bushels per acre. Any estimate below 90 million acres could push the market higher as this seems to be the figure in the market now. Attention is already starting to switch to weather conditions in the US and drought conditions have subsided in Central parts of the US and the southern Plains, although soil moisture conditions have deteriorated in several key Midwestern states where spring crop plantings are about to start.

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