From December 31, 2021 to June 8, 2022, the trend of the spot prices of the three major domestic oil and fat futures can be described as "rising step by step" with an idiom, of which the main 2209 contract price of Dalian soybean oil rose from 8468 yuan / ton to 12280 yuan / ton on June 8, the futures price of the main 2209 contract of Dalian palm oil rose from 7782 yuan / ton to 12382 yuan / ton, and the futures price of the main 2209 contract of Zhengzhou vegetable oil rose from 11450 yuan / ton to 14538 yuan / Ton.
However, at a time when the spot prices of the three major oil and fat period continue to set new records, many market factors are also undergoing drastic changes, which finally make the prices of the three major oils and fats decline as a whole when entering the middle of the year, and lasted for 13 trading days, such as the dalian soybean oil main 2209 contract futures price on June 24, the lowest sliding to 9824 yuan / ton, Dalian palm oil fell to 9012 yuan / ton, Zhengzhou vegetable oil fell to 11825 yuan / ton.
What are the main factors that caused domestic oil and fat prices to rise step by step in the first half of the year? Why did oil and fat prices suddenly fall again in the middle of the year? What kind of operation will the market show in the second half of the year?
After communicating with relevant professionals, the Futures Daily reporter learned that the three major "gray rhinos" and two "black swan" events in the market in the first half of the year boosted the price of oilseeds and oilseeds, and also made the prices of some varieties out of the market supply and demand fundamentals in operation.
Judging from the "gray rhinoceros" incident, first, extreme weather has led to a sharp reduction in Canadian rapeseed production, and South American soybeans have changed from expected increases to yields; Second, labor shortages have led to a slow recovery in Palm Oil production in Malaysia; Third, the prevention and control measures of the new crown pneumonia epidemic at home and abroad are differentiated. There are two main "black swan" events, one is the repeated changes in Indonesia's palm oil export policy; Second, a conflict broke out between Russia and Ukraine.
"In the past year or so, the global oilseed oil futures price has continued to break the historical record, and the rise in futures prices has driven the spot price of oilseeds in the international market to a record high." Teacher Zhang, head of an information agency from Beijing, said that looking back at history, it can be found that the main reason for the sharp rise in the price of rapeseed and soybeans in the international market in 2021/2022 is that the production reduction effect of Brazil and Canada, which accounts for more than half of soybean and rapeseed exports, has been amplified. Subsequently, the imbalance between supply and demand in the market, the conflict in some regions, the adjustment of the export policy of oils and fats in the main producing countries, the rise in international crude oil prices, and the speculation of speculative funds have strongly promoted the rise in global oilseed prices. Among them, the increase in global vegetable oil exports mainly relies on palm oil, the alternating appearance of speculation themes, etc. to push up prices the most. In addition, the increasing global demand for biodiesel in recent years has also boosted vegetable oil oil prices.
The reason for the sudden sharp decline in oil prices in the middle of the year
The analysis of the main reasons for the sudden decline in global oilseed prices, especially in mainland China, since entering June, is mainly due to the large fluctuations in the supply of palm oil producing countries in the world. Although the current major producing countries still plan to take various measures to restrict palm oil production, their domestic accumulated stocks have pointed out the direction for the future operation of oil prices. At the same time, the total yield of U.S. beans and the like in the new season has also become optimistic, and the area sown to crops in Ukraine is not as pessimistic as previously predicted. What is particularly noteworthy is that the probability of biodiesel policies in the United States and other countries is increasing, and the price of crude oil in the international market has begun to fall from high. Specific to the domestic market, a large number of animal oils and fats replace vegetable oils and fats, as well as a sharp decline in demand in industries such as catering, which is doomed to keep the prices of the three major oils and fats high. The liberalization of Canadian rapeseed imports and the recovery of rapeseed production in Hubei in the new season are prompting qualitative changes in the relationship between supply and demand in the market.
According to the statistics of relevant market agencies, The output of palm oil in Indonesia in March this year was 4.15 million tons, an increase of 3% year-on-year and an increase of 8% month-on-month; Exports of 2.02 million tons, down 3.7% month-on-month, down 37.5% year-on-year; ending stocks of 5.68 million tons, an increase of 12.6% month-on-month, an increase of 67.5% year-on-year. April. Indonesia exported 1.69 million tons, and the estimated inventory exceeded 6 million tons. Exports were banned from May 1 to 22, and inventories are expected to reach or exceed 8 million tons by the end of May, and the urgency to accelerate exports is increasing.
As of June 13, Indonesia has raised its export quota to 2.25 million tonnes in line with domestic sales and issued 1.16 million tonnes of palm oil export licenses under the Export Acceleration Program.
Industry professionals believe that the global palm oil market has entered the production increase season and the Urgent Export of Indonesian Expansion Reservoirs may mean that price inflection points have emerged. On the domestic side, the marketing and sales of rapeseed in the new season, the substantial increase in soybean area, and the simultaneous development of oilseed industries such as peanuts will curb the price of oilseeds and oilseeds.
Outlook for oil and fat prices in the second half of the year
From the perspective of the second half of this year, the reduction in production in some soybean-producing areas in South America and the greater uncertainty of weather in U.S. soybean-producing areas will provide some support for soybean prices. It is understood that the decline in soybean production in South America this year has led to a decrease in exports. Among them, Brazil's soybean exports from January to May this year were 43.2 million tons, a year-on-year decrease of 5.51 million tons, and it is expected that exports from June to December will be lower than the same period last year. In the second half of the year, the supply of soybeans in the international market may be relatively tight for a certain period of time, and the price will get some support.
However, after entering the 2022/2023 period, the supply and demand of the global oilseed market are undergoing new changes, and market prices have begun to fall. The USDA expects global oilseed production to change from a decrease in the previous year to an increase in production in 2022/2023 of particular concern. Among them, the global soybean production in 2022/2023 will change from the previous year's production reduction to increased production, and it is expected that the global soybean production and ending stocks in 2022/2023 will increase significantly, and the forward contract price in the international futures market has begun to fall.
At present, soybean sowing in the United States is progressing smoothly. For example, the progress of U.S. soybean sowing, the soybean emergence rate, and the soybean excellent rate released for the first time this year are all higher than the same period last year. In the future, the global soybean market will focus on the impact of weather changes in the final planting area and production area of US beans on the growth status of soybeans. In addition, the area under soybean cultivation in South America continues to increase this year, and if the weather in south American soybean producing areas is normal in the fourth quarter, soybean production in 2022/2023 will increase significantly, and soybean prices in the international market may fall sharply in 2023.
Relevant data show that global rapeseed production in 2022/2023 increased significantly, and international price oscillations fell in the second half of the year. Global rapeseed exports will increase in 2022/2023, and mainland imports are expected to pick up. From January to April this year, the mainland imported 450,000 tons of rapeseed, a decrease of 280,000 tons year-on-year; From June last year to April this year, the cumulative import of 2.09 million tons, a year-on-year decrease of 480,000 tons. It is estimated that the mainland will import about 2.15 million tons of rapeseed in 2021/2022, a decrease of 680,000 tons year-on-year and an 11-year low. At present, the relevant departments have lifted the restrictions on two Canadian rapeseed exporters, large and medium-sized oil and fat enterprises will re-import rapeseed, considering the substantial increase in Canadian rapeseed production and exports, the mainland rapeseed import volume in 2022/2023 will increase, but the fierce global import competition will restrict the substantial increase in mainland imports.
It is also understood that global sunflower seed production in 2022/2023 will decline, but the small amount of trade will have little impact on the market. Relevant international market agencies expect that the area of sunflower cultivation in Ukraine this year will be 4.2 million hectares, down 38% year-on-year; Production was 9.2 million tonnes, down 44.6 percent. The U.S. Department of Agriculture estimates that Ukrainian sunflower seed production is 9.5 million tons, down 7 million tons or 45.7 percent year-on-year.
Overall, global vegetable oil production and inventories increased in 2022/2023, and the supply and demand situation improved.
From the analysis of the domestic oilseed market, the consumption of edible vegetable oil in mainland China in 2021/2022 showed its first decline since 1995, and it is expected that the consumption demand for edible vegetable oil in mainland China in 2021/2022 will be 38.87 million tons, down 3.75 million tons or 8.8% from 42.62 million tons in the previous year. Among them, edible consumption was 34.87 million tons, down 2.21 million tons or 6.0%,; industrial and feed consumption was 3.88 million tons, down 1.59 million tons or 29.1%. The reasons are the impact of the epidemic, high prices to inhibit consumption, and animal oil substitution. For example, due to the impact of the epidemic, domestic retail and catering revenue has declined. Oil and fat oil prices rose sharply, vegetable oil was upside down inside and outside, soybean rapeseed crushing losses, domestic vegetable oil consumption declined, import losses, and imports decreased significantly. The sharp increase in meat production and the decline in prices have led to an increase in animal oil production and an increase in substitution.
Market participants believe that due to policy support, the output of soybeans and other oils on the mainland will increase significantly this year.
The 2021 Central Rural Work Conference proposed that we should unswervingly grasp the production and supply of grain and important agricultural products, make great efforts to grasp grain production, stabilize the area sown to grain, and promote the increase of soybean and oil production.
At the same time, the Ministry of Agriculture and Rural Affairs proposed that it would be difficult to expand soybean oil. Take the expansion of soybean oil production as a major political task that must be completed, do a good job in restoring the soybean area in the four northeastern provinces and regions, support the promotion of corn and soybean strip compound planting in the northwest, Huanghuaihai, southwest and the middle and lower reaches of the Yangtze River, accelerate the promotion of new models and new technologies, and gradually promote the compatible development of soybeans and corn. We should do a good job in the production of oilseed rape, peanuts and other oilseeds, and take multiple measures at the same time to expand the area and increase production.
In addition, the 2022 Central Document No. 1 proposes to vigorously implement the soybean and oilseed production capacity improvement project. Increase the subsidies for arable land rotation and the incentives for large oil-producing counties, and concentrate on supporting suitable areas, key varieties, and business service entities. Promote the belt composite planting of corn and soybeans in the Huang-Huai-Hai, northwest and southwest regions, carry out grain and bean rotation in the northeast region, promote the pilot projects of water drought and rice to bean in some groundwater over-exploitation areas in Heilongjiang and cold well irrigation areas, and carry out demonstrations of planting soybeans in saline-alkali land. In the Yangtze River Basin, the development of winter idle fields to expand the cultivation of rapeseed. Moreover, the mainland also supports the expansion of the planting area of Camellia oleifera and the transformation and upgrading of low-yield forests. In the future, the production of soybeans and oilseeds on the mainland will continue to increase.
The supply and demand fundamental factors that will affect the global oil and oil price trend in the future are mainly concentrated in the following markets: First, the palm oil market. Indonesia's palm oil expansion bank urgently needs to speed up exports, palm oil has entered the production season, and there is a shortage of labor in Malaysian palm orchards. The second is the soybean and soybean oil market. Weather conditions in soybean-producing areas in the United States in the third quarter, soybean planting and weather conditions in South America this year, increased demand for raw wood in the United States, and whether Brazil has raised the proportion of raw wood blending. The third is the rapeseed and vegetable oil market. European rapeseed marketing, Canadian rapeseed planting and growth. The fourth is sunflower oil. When will the Russian-Ukrainian conflict end and Ukrainian sunflower oil exports resume after the end. Fifth, the domestic market. Will the improvement of the epidemic bring about a rapid increase in consumption? Will the low domestic vegetable oil inventory and the continuous inversion of internal and external prices lead to a decrease in imports, which will lead to tight domestic supply and differentiation of internal and external price trends? At the same time, the macro factors affecting global oilseed prices in the future are mainly concentrated in the following aspects: First, crude oil prices have risen to historical highs. The second is the United States, South America and Indonesia, Malay raw firewood support policy bullish oil prices. Third, the European raw firewood policy is negative for oil prices. Affected by the sharp rise in vegetable oil prices in the first half of the year, many European countries began to reduce the amount of biodiesel blending. The European Parliament's Environment Committee recently voted to limit crop-based biofuels to less than half of the total use of biofuels used in transportation and to phase out palm and soybean-based biofuels by 2023.
In addition, global inflation and interest rate hikes in various countries will lead to slower economic growth. The World Bank President recently said that global economic growth will fall from 5.7% in 2021 to 2.1% in 2022 and to 1.5% in 2023. Inflation in many countries is currently at decades highs, and excessive interest rate hikes taken in the late 1970s to curb inflation led to a global recession in 1982 and triggered a series of financial crises in emerging market and developing economies. Interest rate hikes have had a negative impact on economic growth, and the appreciation of the US dollar in tandem with the RISE of the CRB index is difficult to sustain.
This article originated from Futures Daily