Overview of views:
Production: Horse palm production decline this year, pay attention to the process of introducing labor, global palm oil production increase mainly depends on Indonesia, Indonesia is expected to increase production by 7%; Canadian rapeseed is expected to reduce production seriously; the main soybean producing areas of the United States are expected to have more recent rains that are not conducive to harvest, it is expected that the south American soybean area will increase significantly in 2021/22, Brazil will start sowing, and it is necessary to be vigilant against the La Niña phenomenon; the recent domestic oil mill power curtailment situation has eased, and it is expected to return to normal at the end of this month, and it is necessary to pay attention to the weather in the main soybean producing areas in South America.
Demand: Strong energy prices drive the raw wood market, and Biden may continue to promote the green energy stimulus policy proposed when he took office in the near future, the proportion of raw wood blending in South America will be reduced, and Indonesia will postpone the implementation of the B40 firewood plan. The EU announced that it will increase the share of renewables in the energy mix to 40% by 2030, higher than the previously set target, which is expected to boost vegetable oil demand. India has sharply reduced import taxes on oils and fats to boost demand.
Inventory: Horse palm and China's vegetable oil stocks remained low, and India's oil and fat stocks rebounded significantly.
Policy Recommendations:
Brazil is in a normal climate, soybean planting is faster than in previous years, Argentina is in drought, and be wary of the impact of La Niña on the soybean growth period. Historically, La Niña's impact on palm oil output exceeds that of soybeans, horse palm production is difficult to recover in the short term, stocks will remain low, and the process of bringing in workers to Malaysia is concerned. Biden will continue to promote green energy stimulus policies in the near future, pay attention to the landing of relevant policies, the peak season of oil and fat consumption is coming, it is expected to maintain a tight pattern of global supply and demand, oil and fat will continue to rise after short-term follow the correction of crude oil, and pay attention to crude oil prices and horse palm production.
Risk Warning:
Raw wood policy, horse palm production, weather in major producing areas, crude oil prices, macro environment, Sino-US relations, China-Canada relations
palm oil
I. Supply: Horse palm production is difficult to restore Horse palm production is difficult to recover
Horse palm production fell slightly in September due to excessive precipitation, while palm oil production in Indonesia remained high in August. Malaysia's Ministry of Human Resources said it would give the green light to bring in 32,000 foreign workers for oil palm plantations, significantly earlier than the previously claimed end-of-year. The Prime Minister said that despite quotas and arrival dates, fully vaccinated migrant workers would be allowed to enter the plantation industry on a case-by-case basis, and officials noted that employers would bear the full cost of bringing in foreign workers, while ensuring that all employees were vaccinated at their own expense. Current data show that horse palm production has declined slightly this month, and the imminent emergence of La Niña will also affect palm oil production.
Indonesia is expected to increase production by 7% in 2021 and 2% in 2022.
Oil World expects global palm oil production to rise by 5.2% to 79.76 million tonnes in 2021/22, with Malay palm oil production at 19 million tonnes (+6.3%) and Indonesia at 47.2 million tonnes (+4.2%).
Two demand
1. The main production area – raw firewood plan is suspended
Horse palm exports in September were 1.597 million tons (+36.8%), well above market expectations, and indian demand is expected to fall 15% year-on-year in October as Indonesia raises export taxes in September and Indian demand shifts to Malaysia.
In terms of raw firewood, due to the high price of palm oil, Indonesia postponed the B40 raw firewood plan originally scheduled for July, and the specific time is not determined. Affected by the epidemic, Malay will suspend the B20 firewood plan in Sabah and the Malay Peninsula, and the areas that have been implemented will not be changed, and the government said it will enforce the B20 plan by the end of next year.
Oil World expects Indonesia to export 29.9 million tonnes (+4.5%) of palm oil and Malaysia 16.7 million tonnes (+5%) in 2021/22.
2. The main selling country – China's procurement is stable
In September, China's vegetable oil imports remained high, and palm oil purchases increased in the far month.
India's edible oil imports reached a new high in September, mainly due to the significant increase in palm oil and sunflower oil, and India announced a sharp reduction in oil prices from 10.14 cases, which is expected to greatly boost India's vegetable oil imports and complete a round of replenishment.
Three inventory
1, the main producing country – horse palm low inventory
Horse palm stocks fell to 1.747 million tonnes (-7%) in September due to a sharp increase in exports, significantly lower than expected, and horse palm production increases continue to be delayed, and inventories are expected to remain low by the end of the year. After the Indonesian palm oil tax cut, it is expected that the pressure of high inventory will ease, and it is necessary to continue to pay attention to the precipitation and epidemic situation in Southeast Asia.
2, the main sales country – inventory recovery
India's vegetable oil port inventories and total inventories have rebounded, and a round of replenishment is expected to be completed.
As of October 23, China's palm oil inventory was 392,300 tons (-12.1%), and the three major oil and fat stocks of bean palm vegetables were 1.573 million tons (-6.3%), and the inventory decreased significantly.
IV. Balance of supply and demand
V. Profit and spreads
soy sauce
One
supply
1. United States – Too much precipitation affects harvesting
Recently, some major producing areas in North America have received more precipitation and the harvest progress has been slow, with a harvest rate of 73% as of 10.25. The October USDA report projected a yield of 51.5 bushes per acre for the new season, up from the previous Pro Farmer estimate of 51.2 bushes per acre and also above market expectations.
U.S. soybean crushing was 4.2 million tonnes in September, and this month the USDA reported raising U.S. soybean crushing to 2.09 billion tonnes in 2021/22.
2. South America – Be wary of La Niña influences
Soybean production in Brazil in 2020/21 was 137.5 million tonnes (+7.4%), and in Argentina it was 43.5 million tonnes (-11%). South American soybean yields are better, with an increase in South American soybean acreage expected in 2021/22. In October, the USDA expects soybean production in Brazil to be +5.1% and Argentina to be +10.4% in 2021/22.
Recent precipitation, improved moisture in Mato Grosso and Rio Grande do Sul, and soybean sowing has been steadily advanced, conab said that as of October 23, Brazil's soybean planting progress was 37%, significantly faster than in previous years.
Argentina is in drought and the sowing window will open at the end of the month. NOAA expects the probability of la Niña to increase until February 2022 (87% probability), alert to its impact on soybean growth, mainly in Argentina.
3, China – oil mills power rationing for the better
Soybean crushing fluctuated with soybean arrivals and soybean meal stocks, and as of the week of 10.22, soybean crushing was 1.6016 million tons, with an operating rate of 56.5%. The current curtailment situation has improved and is expected to return to normal at the end of the month.
1. The United States – The raw firewood policy may continue to advance
According to the USDA Weekly Export Sales Report, U.S. soybean export sales for the week ended October 21 increased by 1.183 million tons, export shipments were 2.406 million tons, and export inspections for the week ended October 21 were 2.112 million tons.
The current sharp rise in crude oil prices has provided an opportunity for the implementation of raw firewood, and Biden may continue to promote the green energy stimulus policy proposed when he took office in the near future, support vegetable oil prices, and pay attention to the landing of relevant policies in various countries.
2. Brazil – exports declined
Brazil exported 4.83 million tons of soybeans in September, up from the same period in previous years, according to Brazil's Ministry of Commerce and Trade. Safras and ABIOVE expect total exports of around 83-90 million tonnes in 2021.
The Brazilian government has decided to reduce the mixing rate of raw firewood to 10%, down from this year's target of 13%.
3. Argentina – Lower the mixing ratio of raw wood
Argentina has reduced the mixing ratio of raw firewood to 5%, releasing more than 500,000 tons of soybean oil for export. At present, the sales speed of Argentine farmers is lower than last year, the peso continues to be lower, farmers are reluctant to sell, regard soybeans as hard currency, and only sell the necessary spot to obtain revenue, and the progress of soybean sales in Argentina in the current season is about slow.
4. China – Keep soybean imports high
In September, China's soybean imports fell sharply, it is expected that China's total soybean imports will remain high in 2021, due to the needs of national reserves, the overall import volume of soybean oil this year has also increased.
1. United States – Inventory picks up
U.S. soybean oil inventories have rebounded to a high level, and the table needs to decline. This month's USDA supply and demand report raised its 2021/22 U.S. soybean ending stocks forecast to 320 million pon, significantly higher than last month's estimate, with a 7.3% co-consumption ratio and a 2021/22 global soybean inventory increasing to 104.57 million tonnes.
2, China – soybean oil stocks are low
Soybean stocks in oil mills last week were 4.693 million tons (-2.4%), soybean oil stocks were 884,100 tons (-5.32%), due to the recent domestic soybean oil demand is better, it is expected that China's soybean oil stocks are at a low level.
5. Profit and spread
Strategic perspective
This article is based on the Chaos Tiancheng Study