As of April 3, the main price of soybean oil rose 6.32% compared with the beginning of March, the main price of vegetable oil rose 4.7%, and the main force of palm oil rose 13.32%, and the main force of vegetable oil and soybean oil has not yet broken through the previous high in the second half of 2023, but the main force of palm oil broke through the previous high, reaching a maximum of 8572 yuan / ton, the largest increase. The main contradiction in the pre-holiday oil market is still the issue of the periodic contraction of palm oil supply. The market expects a macro interest rate cut, and the rebound in U.S. crude oil also drives oil to strengthen.
Starting from December 2023, Malaysia's main palm oil producing areas have suffered floods and then droughts, and the first quarter itself is also a cycle of palm oil production reduction, superimposed on the impact of Ramadan, resulting in a larger-than-expected production reduction. Towards the end of March, the rainfall in Malaysia's main palm oil producing areas improved, but it could not reverse the lack of rainfall, mainly due to the impact of the current round of El Niño ends. There was too little rainfall in the month, and given the weather and the impact of Ramadan, actual production during Ramadan was limited this year. The Malaysian Palm Oil Association (MPOA) estimated a 9.71 percent increase in production in March, well below the 17.34 percent monthly average for the same period in history.
Palm oil imports from countries such as India usually peak in April each year, mainly for Ramadan. Recently, India's import of South American soybean oil has been delayed. Under the situation in the Red Sea, the import of sunflower oil still faces certain risks. Malaysia's palm oil exports rose by 20% in March, surpassing the historical average of 18% in March, despite palm oil premiums being higher than soybean oil and sunflower oil, and in the face of strong import demand from countries such as India, palm oil has become the preferred importer. Malaysia's palm oil inventories fell for the fifth consecutive month at the end of March, falling to an estimated 1.79 million mt.
After Ramadan, there will be a few days of holidays in Malaysia's main palm oil producing regions, and the monsoon transition may end in May, during which the weather will remain mainly dry, so production will decline in April. Due to the impact of Ramadan demand, palm oil exports may continue to remain high in April, and exports will probably continue to increase in the first half of the month and decline slightly in the second half of the month. As a result, Malaysian palm oil inventories will continue to decline at the end of April.
After the end of Ramadan, palm oil export demand has entered a seasonal decline, while palm oil still has a premium over other fats. With El Niño weakening and shifting towards La Niña, drought conditions will ease and rainfall will increase after the monsoon transition phase. According to Malaysia's official data, the labor shortage has been plaguing the recovery of its palm oil production before, but it has been basically resolved since June 2023, and the labor force has returned to the pre-epidemic level. After April, the weather in Malaysia's main palm oil producing areas will improve, production will also recover significantly, and the monthly supply may once again exceed the historical monthly average level, and the trend of accumulation will be more obvious.
Unlike Malaysia, Indonesia's monthly palm oil production has exceeded the historical average since September 2023, especially in January 2024. Moreover, since February, the weather conditions in Indonesia have been better than those in Malaysia, and the rainfall in the next half month is basically at a normal level, so Indonesia's palm oil production performance will also be better than Malaysia's, and the widening of the spot price gap between Malaysia and Indonesia's refined palm oil can also be verified by the side.
Statistics Canada estimated in March that canola acreage in 2024/2025 fell by 3% to 8.66 million hectares, and canola prices in Canada have rebounded more than wheat since the beginning of February, and the actual area planted may decline even less. In mid-to-late March, Canada's official estimate of a new canola yield of 2.12 tonnes/ha, up from 2.07 tonnes/ha of the old crop, and an estimated 18.1 million tonnes of new rapeseed production, slightly lower than the 18.33 million tonnes of the old crop.
According to the forecast of the National Weather and Oceanic Administration, the intensity in the future will be lower than the same period in 2022, and by mid-April, the overall rainfall in the main canola producing areas of Canada will be favorable, which will be conducive to canola planting at the end of April, and the trend yield cannot be ruled out to return to 2.2 tons/ha, which may eventually increase production.
Australia's 2024/2025 rapeseed output is forecast to increase by 10% to 6.07 million tonnes due to weakening El Niño and improved weather. The EU's 2024/2025 rapeseed output is expected to fall by 1.77 percent to 19.467 million tonnes due to poor weather at the beginning of planting, a lower decline than earlier estimates. Combined canola production in Canada, the European Union and Australia in 2024/2025 is virtually unchanged from the previous season, with the potential for an increase in the future.
At the end of March, the U.S. bean planting intention report estimated that the 2024/2025 U.S. bean planting area was 86.51 million acres, in line with market expectations, an increase of nearly 3 million acres over the old crop, but considering the strong crushing domestic demand, only when the yield returned to the trend, the new crop stock-to-sales ratio will be consistent with the old crop. Since 2023, the price of crops in the United States has fallen, and the total acreage of major crops has decreased.
The final actual planting area of American beans is likely to be less than the data in the planting intention report at the end of March, so it can be said that the supply and demand of new American beans are loose, and more rely on yields to complete. For the time being, the soybean harvest in southern Brazil and Argentina will continue to weigh on the premium of soybeans and soybeans in South America, but starting from May, considering that the supply of new crops in Brazil is nearly 10 million tons less than that of old crops, U.S. soybeans have entered the traditional weather speculation stage, and the premium of soybeans in the United States and South American soybeans will be stronger.
Therefore, April may be a turning point in the oil market, and then the resumption of palm oil production will drag down the oil and then fall, during which the relationship between strength and weakness will also change again, the strongest palm oil may become weaker, and the medium and long-term soybean oil may be stronger than palm oil and vegetable oil. (The original article was published on the third page of the grain and oil market newspaper on April 11, 2024)
Source丨Grain and oil market newspaper
General Duty丨Liu Xinhuan Editor丨Congshen
