Summary summary
At present, vegetable oil is still in the off-season of consumption, the superimposed supply is sufficient, the vegetable oil inventory continues to accumulate, and the weak fundamentals make the vegetable oil in a passive state of growth in the near future. However, the total inventory of the three major domestic oils and fats is still at the low level of the same period of the calendar year, and the overall oil and fat in the short term still maintain a tight pattern, and the overall price of the 01 contract may still show a trend that is easy to rise and difficult to fall. Considering the sharp reduction in Canadian rapeseed production, which has led to the strengthening of the tight supply and demand pattern of global rapeseed, it is difficult for Canadian rapeseed prices to undergo a sharp correction in the second half of the year, and it is necessary to adjust demand through high prices. At present, rapeseed crushing profits are in a deep inversion, affecting the procurement of the fourth quarter, in the context of no significant decline in the cost side, the repair of crushing profits may need to be achieved through the rise in the price of vegetable oil and rapeseed meal. With the peak season of oil and fat consumption ushering in Q4, the fundamentals of vegetable oil supply and demand will usher in improvement, and it is strategically recommended to focus on the opportunity to expand the 1-5 spread.
Risk points: U.S. bean production significantly exceeded expectations, palm oil production significantly exceeded expectations, and large amounts of oil and fat were dumped
First, the tight supply and demand pattern of global rapeseed has been strengthened
In the early morning of August 13, the USDA released the latest August supply and demand report data. According to the latest USDA report in August 2021, global rapeseed production in 2021/22 was 69.97 million tons, a decrease of 4.17 million tons from the previous month's forecast and a decrease of 1.84 million tons year-on-year, mainly due to a significant decrease in Canadian rapeseed production. Yields declined due to persistently hot and dry weather in Canada, which damaged Canadian rapeseed yields and sown areas. Rapeseed imports were 14.04 million tonnes, down 2.99 million tonnes from last month's forecast. Rapeseed exports were 14.11 million tonnes, down 3.11 million tonnes from the previous month's forecast. The main reason for the significant decline in global rapeseed trade is that Canada accounts for more than 60% of the global rapeseed trade, and its importance is self-evident. Due to the sharp decline in the amount of Canadian rapeseed production this season, the number of canadian rapeseeds available for export has fallen sharply, and countries such as the European Union and China can only passively reduce the import of rapeseed. Due to the sharp decline in Canadian rapeseed production, the latest data in August showed that global rapeseed production in 2021/22 is expected to increase or decrease from the previous year, with production falling to the lowest level since 2013. Global rapeseed still continued the trend of destocking, and the inventory-to-consumption ratio was 6.17%, a new 10-year low. Global rapeseed supply and demand remains tight pattern unchanged, in the second half of the year, Canadian rapeseed prices are difficult to appear a sharp correction, need to adjust demand through high prices, from the cost side to the domestic vegetable varieties to form a strong support.
Second, the global consumption ratio of vegetable oil depots is still at a historical low
According to the latest USDA data, the global vegetable oil ending stocks in 2021/2022 were 22.03 million tons, and the ending stocks continued the downward trend. The inventory consumption ratio is 10.35%, the lowest level in the past twelve years, the global vegetable oil market still maintains a tight pattern, the recent uncertainty on the Malaysian palm oil and US soybean production side has delayed the process of global vegetable oil inventory reconstruction, and short-term vegetable oil will remain tight.
Malaysian palm oil supply and demand data released by the MPOB for July showed that palm oil production in July fell by 5.17% month-on-month to 1.52 million tons, and due to the impact of the epidemic, horse palm production, which was originally in the production increase season, showed an anti-seasonal decline. Inventories fell 7.3% Q-O to 1.496 million tonnes, the lowest level since 2015. From the perspective of the seasonal law of palm oil production, the third quarter of each year is the peak of production in the middle of the year, and then it will enter the seasonal production reduction stage, and the yield loss caused by the failure to harvest palm fruits in time due to labor problems cannot be compensated in the follow-up, leaving malay time to resume production and inventory establishment. Palm oil is a labor-intensive industry that requires a lot of manpower to complete the harvesting of palm fruits. Malaysia's palm oil industry has a relatively high proportion of foreign workers, mainly relying on the supplement of workers from neighboring countries, and the Malay epidemic lockdown policy restricts the entry of foreign workers. Malaysia is still plagued by the pandemic after announcing that it would extend its movement control order indefinitely until the infection rate is effectively controlled. Although the epidemic control measures have been strengthened, as of mid-August, the number of new confirmed cases in Malaysia has continued to reach a new high, and has now exceeded the 20,000 mark. Considering the current severe situation of the Malay epidemic, the possibility of opening up the entry of overseas labor in the short term is unlikely, if the labor shortage problem is difficult to be effectively solved in the third quarter, the recovery of Malay palm oil production this year is expected to be limited, and it may be difficult to accumulate inventory during the year.
The USDA August supply and demand report lowered the U.S. soybean yield estimate to 50 bushels/acre, unchanged in area, resulting in a lower production of 4.339 billion bushels, but the end-of-period inventory was flat in July due to lower demand. The yield of 50 bushels/acre has led to the new season of U.S. beans remaining tight in supply and demand. Global soybean ending stocks of 96.15 million tons, the inventory consumption ratio of 25.4%, the inventory consumption ratio is the second lowest position in six years, before the U.S. soybean production, the global soybean supply and demand as a whole remained tight.
Domestic oil and fat stocks remain low
This article originated from the Financial Circle Network