Oils and fats have hit two price peaks since their listing, the first in the first half of 2008, the second in the fourth quarter of 2010 to the third quarter of 2012, the two peak oil prices are above 10,000 points; oil and fat experienced a sharp decline - bottoming out - a big rise and weighed 10,000 points after ten years.
The main consumer products of domestic vegetable oil are soybean oil, palm oil and vegetable oil, of which soybean oil is mainly provided by imported soybean crushing, palm oil is all imported, and vegetable oil is imported and domestic rapeseed crushing coexist, which also determines the impact of global soybean pricing benchmarks U.S. beans and palm oil pricing benchmarks ma palm on domestic oils and fats. The following four are the monthly charts of the U.S. bean-weighted, horse palm-weighted and continuous soybean oil and palm oil January contracts since the beginning of 2006, and the four are generally consistent; however, since the second quarter of 2021, as the supply and demand situation of U.S. beans and horse palms has diverged, it has also had different impacts on the corresponding varieties in China, and the meal has weakened with the U.S. beans, and the three major oil trends are quite consistent with the horse palm, resulting in a sustained oil strong and weak pattern.
1 The marginal effects of horse palm yield deviations continue to ferment
Subject to labor shortages, horse palm production in 2021 has not been able to increase in volume, and the decline in inventory in September is more than expected, which shows that the August increase and inventory increase are the repair of counter-cyclical production reduction and warehouse reduction in July, and the horse palm supply situation has not improved. The Malay government said that in mid-October it will gradually introduce foreign workers in batches, but it will take at least November to bring practical benefits to production, from the current high-frequency data, the output of horse palms in October may continue to be sluggish, and the introduction of foreign workers may slow down the pace of seasonal production of horse palms to some extent, but it is expected that the tight supply of horse palms will be difficult to change before the end of the year.
In addition, seasonal consumption and holiday consumption boosted the demand for palm oil imports in the main consumer countries, India's palm oil imports rose sharply in August and September, and recently lowered the import tariffs on crude vegetable oil and its refined oils again to stimulate imports to stabilize the price of domestic vegetable oils; China's recent palm oil import profit window has been opened from time to time, stimulating traders to buy ships; coupled with the possible implementation of the crude vegetable oil export policy adjustment in Indonesia, Malay palm oil exports may continue to be supported.
2 The tight supply of U.S. beans is loose, and raw firewood is hyped or rekindled
One of the main factors affecting the trend of oilseed protein since the second half of 2020 is the supply pattern of US beans. After the signing of the Sino-US trade agreement in 2020 and the almost hollowing out of Brazilian soybean inventories in the first half of the year, the market's import demand turned to the United States; after 18-19 years of continuous production cuts and increased export demand, U.S. bean inventories fell sharply, and the supply and demand pattern completely changed, boosting the U.S. soybean rally to continue into mid-2021. With the better weather, the expected increase in U.S. soybean yields and production expectations in the new season, the fund's enthusiasm for doing longs weakened, and the U.S. bean shock weakened from mid-June 2021, coupled with the quarterly inventory report and the October supply and demand report, the old crop carry-over inventory increased, and the supply of new crops increased, and the pressure on U.S. beans further moved down to the pre-March planting intention report level. Transmitted to the country, soybean meal followed the disk down to the level of the beginning of the year; soybean oil was less affected by it, and continued to be strong in coordination with other oils and fats.
In addition, with the sharp rise in crude oil and natural gas prices, raw wood speculation or re-ignition, U.S. soybean oil returned to the high range. It is understood that the production capacity of raw wood under construction in 2021-2024 will exceed 4 billion gallons per year, which is almost 5 times the existing production capacity.
3 Domestic supply and demand in the fourth quarter were both supported
Domestic imports of soybeans in September were 6.876 million tons, a decrease of 27.5% month-on-month, and the import volume from October to December was still not high, with a monthly average of about 7.2 million tons, and the soybeans in oil mills continued to go to the warehouse; from the crushing situation in the same period of previous years, the follow-up or the emergence of a monthly raw material gap of 50-1 million tons. Power curtailment and festivals have led to a decrease in the operating rate of oil mills from September to early October, and the rise in soybean oil inventories has been weak, and it is currently difficult for some manufacturers in the north to pick up goods. Palm oil inventories have rebounded, coastal vegetable oil inventories have declined, the total inventory of the three major domestic oils and fats is low, and the consumption in the peak season in the fourth quarter may further compress the upward space of oil and fat inventories.
Overall, the supply situation of palm oil production areas in the fourth quarter and domestic seasonal consumer demand still support the oil futures price, superimposed on the linkage of raw wood demand under the high price of crude oil, the three major oils and fats in the fourth quarter are likely to maintain a high and strong trend; however, the market is more sensitive to the news response or aggravates the difficulty of unilateral operation under the high price, and can consider intervening at a low price and cautiously chasing up.
This article originated from the Merya Futures Research Institute