Logic and drive
Long-term main logic and drive
Horse brown stocks
MPOB's October supply and demand data showed malaysia's palm oil inventories of 1746520 tonnes in September, down 6.99% month-on-month and up 1.25% year-on-year.
Statistically, the second half of the year is generally the accumulation stage of horse palms, while Malay officials expect the ending stocks of horse palms in 2021 to be around 1.7 million tons.
The main logic of the palm oil bull market is not only a problem of its own fundamentals, but also related to the overall environment (such as crude oil).
Medium-term main logic and drive
MPOB's October supply and demand data showed malaysia palm oil production in September of 1703740 tonnes, down 0.39% month-on-month, while Malaysia's palm oil exports in September were 1597393 tonnes, up 36.83% month-on-month. The recovery in production was less than expected and the destocking caused by the sharp increase in exports was the main reason for the sharp rise in palm oil from September to early October.
There are certain variables in October production, and the weakening of export data is relatively certain; after October, palm oil entered a four-month production reduction cycle.
Short-term main logic and drive
ITS: Malaysia's palm oil exports were 528901 t on October 1-10, compared to 572345 t in the same period last month, down 7.6% month-on-month.
SPPOMA: From October 1 to 10, Malaysia's palm oil production decreased by 9.13%, the oil yield increased by 0.47%, and the production decreased by 7%.
The bullish bearishness of high-frequency data is directly related to the short-term rise and fall of the market. Judging from the high-frequency data released so far, production is still less than expected, but at the same time, exports have also declined.
Other Logic and Drive - Mei Dou
The October USDA supply and demand report shows that the US soybean yield is expected to be 51.5 bushels/acre in 2021/2022 and 50.6 bushels/acre in September, an increase of 0.9 bushels/acre month-on-month; and the US 2021/2022 soybean ending stocks are expected to be 320 million bushels, and the September forecast is 185 million bushels, an increase of 135 million bushels from the previous month, reporting an overall bearish report.
Other logic and drive - import
According to data from the General Administration of Customs, China imported 6.876 million tons of soybeans in September, and China's soybean imports fell by 0.72% year-on-year to 73.986 million tons from January to September. China's palm oil imports in August 2021 were 470,000 tons, an increase of 120,000 tons from 350,000 tons in July.
Other logic and drivers - domestic inventory
As of October 12, 2021, soybean oil port inventory was 839,800 tons, an increase of 7.97% over the previous week. As of October 8, East China vegetable oil inventory was 315,100 tons, down 9.48% from the previous week. Domestic oil and fat stocks are generally low, and vegetable oil stocks are falling back at a high level.
Valuation analysis
Grease basis
From the perspective of basis, palm oil basis is the strongest; soybean oil is affected by power curtailment and low inventory in oil mills, and the basis is stronger; while the vegetable oil basis is obviously weaker.
Import costs
From a cost perspective, the cost of palm oil imports continued to strengthen; the cost of soybean imports was relatively moderate.
Import profits
From the perspective of profits, the recent closure of import profits, the profit range tends to ease.
Quotes summary
Summary of the oil and fat market
Ma Brown: In the long run, the accumulation of inventory expectations is broken, and the inventory will still be dynamically maintained at a low level in 2021; in the medium term, there is a certain controversy in October production, the decline in exports is a high-probability event, and after October is a four-month production reduction cycle; in the short term, the high-frequency data has a greater disturbance on the disk surface, the high-frequency production is low, and the high-frequency export data is not good, and the supply and demand of Horse Palm in October needs to be further observed in the later high-frequency data; overall, it is still bullish in the long run, but considering the poor export data in October, the October market may be weaker than September. The view is cautiously bullish.
U.S. beans: the yield of newly-made soybeans has increased, inventories have increased, the ratio of storage to sales has increased, U.S. beans have been weakly run, and U.S. beans lack obvious drivers.
Domestic: Domestic oil and fat stocks are at a low level, and at present, many oil mills in the domestic coastal areas have different degrees of shutdown due to power rationing, and the basis support is strong. Domestic oil and fat futures, especially palm deep premiums. Overall, domestic oils and fats are still mainly driven by the outer disk, while the long-term fundamentals of the outer disk are still strong, and the domestic oils and fats hold a cautious bullish view.
Investment advice
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This article originates from the Minmetals Futures microservice