January 28, 2022, the last trading day of the Commodity Futures Market for the Year of the Bull. Commodity markets as a whole have been quiet, while oil and fat prices have continued to rise, with momentum towards record highs.
With the introduction of Indonesia's policy of restricting palm oil exports, combined with the weather factors in South America, the international oil price has further changed suddenly, the price of palm oil in Malaysia has refreshed the historical record, and the domestic palm oil, soybean oil and other oil prices are approaching the 10,000 yuan mark, which is only one step away from the historical high.
In fact, since the second half of 2020, the world has been in a tight supply of vegetable oil, but it has not improved for more than a year. In the past 2021, oil varieties have continued to rise, according to the Statistics of the Food and Agriculture Organization of the United Nations, the prices of a variety of vegetable oils, including palm oil, soybean oil, sunflower oil, etc., have increased by 65.8% in 2021 compared with the 2020 level, which is not only the largest increase in the main food types counted by the agency, but also the largest annual increase in vegetable oil prices since there are statistics.
Indonesia has introduced policies to restrict palm oil exports
On January 27, against the backdrop of a sharp rise in the US dollar, Bursa Malaysia Derivatives (BMD) crude palm oil futures closed up more than 2 percentage points, again hitting a record high, reaching an intraday high of RM5380/tonne. It was also the third consecutive trading day of gains.
On the same day, Indonesia's trade minister announced a new regulation that mandates all edible oil exporters to sell 20% of the planned edible oil exports in the domestic market. Indonesia is the world's number one producer and exporter of palm oil, and the price of palm oil in Indonesia will rise by about 40% year-on-year in 2021, and the restrictions may push global edible oil prices higher.
During the overnight trading session on the 27th, international crude oil futures once broke through the $90 mark, hitting a new high in 7 years. The rise in crude oil has improved the outlook for demand for biofuels, which is a raw material for the production of biodiesel in Malaysia and Indonesia. This helps offset the impact of the decline in export demand. Boosted, Chicago soybean oil futures rose 2.3 percent, the highest level in seven months.
Over the past year, the problem of undersupplying palm oil in Malaysia and Indonesia has been delayed. Mainly in the context of the epidemic, the labor shortage in Malaysia has intensified, the resumption of Malay palm oil production in 2021 is less than expected, and the production of Indonesian palm oil in 2021 is also less than expected due to more rainfall. Indonesia's restrictions are likely to further add fuel to the fire.
On January 28, after the closing of the last trading day of the domestic bull year commodity futures market, the main contract of domestic soybean oil futures 2205 was quoted at 9836 yuan / ton, and the main contract of palm oil futures 2205 was quoted at 9934 yuan / ton, both of which approached the 10,000 yuan mark hand in hand, both of which were only one step away from the historical high.
Domestic oil and fat stocks are low, at a low point in nearly 5 years
"Domestic palm oil inventories are now at their lowest level in nearly 5 years, while soybean oil inventories are still at their lowest levels in the same period in the past 4 years." Huang Ting, an analyst at Southwest Futures, said that the domestic oil and fat inventory is low, and the disk price is also at a historical high, which has fully cashed in the bullish factor of low inventory.
For the palm oil market in Southeast Asia, what can really have a greater negative impact on palm oil is still the expectation of solving Malaysia's labor problems, which is still difficult to solve as soon as possible under the plague of the epidemic. This will also make the cost of domestic palm oil imports continue to be high, and eventually support the high price of palm oil futures.
The National Grain and Oil Information Center report believes that the trend of crude oil prices is relatively firm, and oil prices are still supported. It is expected that the arrival of domestic soybeans in January and February will decline year-on-year, and soybean and soybean oil stocks will be at a low level, supporting soybean oil basis quotations to remain firm. In the short term, the fundamentals of domestic and foreign oil and fat supply and demand have not changed much, and the tight situation is still continuing, and it is expected that oil and fat prices will continue to fall with limited space.
On January 28, data released by the Ministry of Agriculture and Rural Affairs showed that the import and export volume of agricultural products on the mainland was 304.17 billion US dollars, an increase of 23.2% year-on-year. Among them, cereal imports surged and soybean imports fell. Soybean imports were 96.518 million tons in 2021 and 100.315 million tons in 2020, down 3.797 million tons year-on-year. Soybean production, which will be only 16.4 million tonnes in 2021, means that the import dependence on soybeans is 85.5%.
At the same time, the cost of domestic oil and fat imports will continue to climb in 2021. Statistics from the General Administration of Customs show that in 2021, edible vegetable oil imports were 11.315 million tons, down 3.2% year-on-year, but the import value was 11.57 billion US dollars, an increase of 32.8% year-on-year. Obviously, behind this is a further rise in the price of oil and fat.
Tensions in the international oil and fat market may be further exacerbated
In addition to tight palm oil markets in Asia, geopolitical events between Russia and Ukraine since late January have sparked concerns about exports of sunflower seeds, sunflower oil and vegetable commodities in both countries, or further exacerbated global vegetable oil supply tensions.
Known as the granary of Europe, Ukraine is an important participant in the global agricultural market, the largest importer of sunflower oil and the second largest importer of corn in China, while Ukraine is also the world's largest exporter of sunflower oil.
In addition, in South America, analysts are also adjusting production forecasts due to weather influences. On January 27, the Brazilian Vegetable Oil Industry Association (ABIOVE) released a report lowering Brazil's 2022 soybean production forecast to 135.8 million tonnes, down 4.2 million tonnes from earlier expectations. Brazilian soybean export forecasts for 2022 were also revised down from 91.1 million tonnes to 86.9 million tonnes due to lower production. ABIOVE said the agency does not rule out the possibility of further lowering the forecast if weather conditions brought about by la Niña cause more damage to crops.
Consultancy IHSMarkit reported on Jan. 26 that U.S. soybean acreage is expected to reach 87.805 million acres in 2022, down from the company's forecast of 88.815 million acres on December 16, but up from 87.195 million acres of soybeans in 2021.
China's agricultural futures trading volume is leading the world
The global trading volume data of the 2021 International Futures Association Futures Industry Association (FIA) has recently been released, and the domestic agricultural trade situation is particularly eye-catching.
The data shows that in the 2021 global agricultural product volume ranking, Chinese varieties occupy the top 11 and occupy 15 seats in the top 20, including soybean meal, rapeseed meal, soybean oil, palm oil, corn, natural rubber, pulp, sugar, cotton, rapeseed oil, apples, eggs, corn starch, soybean No. 1, soybean meal options.
Editor-in-charge: Tactical Constant