It’s evident that China is adjusting its sourcing dynamics, favouring Brazil over the US due to favourable pricing trends. Let’s look at the summary of the main veg oil markets over the past month.
Palm Oil:
Discussions within the market reveal a consensus regarding the price ceiling for BMD, estimated at MYR 4000-4100 per metric ton. Presently, the BMD price stands at approximately MYR 4073 per metric ton. Insight suggests a forthcoming recovery in production come May, as is customary. However, the current spread of palm oil over its competitors, alongside the anticipated surge in Argentina’s soybean oil exports, may exert downward pressure on palm oil prices. Nevertheless, most players emphasize the potential for geopolitical escalations in the Middle East and a plausible hike in energy prices, which could introduce an upside risk. Consequently, I think I would maintain a cautiously neutral stance, albeit slightly leaning towards bearishness regarding BMD palm oil. This is a viewpoint aligned with trader’s projections from within the broader market. This is a viewpoint aligned with trader’s projections from within the broader market, incorporating insights from Roman Dawidowicz.
Soy Complex:
Roman Dawidowicz, an esteemed analyst in the agricultural sector, underscores the significance of these developments, particularly in the context of global commodity markets. Confidence is mounting regarding the magnitude of Brazil’s soy crop, anticipated to fall between 145-150 million metric tons. Similarly, Argentina’s crop is projected at approximately 50 million metric tons, with no significant concerns regarding crop size. Attention has now shifted towards monitoring US plantings, with USDA forecasting the upcoming US soy harvest at 113 million metric tons, a slight dip from the previous season’s 116 million metric tons. At current price levels, Brazilian farmers exhibit a more optimistic disposition towards selling their crops. Given that prices remain at multiyear lows, traders don’t foresee substantial downside risks hence most maintain a neutral to slightly bullish outlook for Brazil and Chicago bean prices. This sentiment extends to soybean oil, buoyed by heightened interest from India, which seeks alternatives to costly palm oil, coupled with CBOT soy oil at multiyear lows. This stance is in line with the forecasts from several analysts.
Rapeseed Oil:
According to Roman Dawidowicz, attention is now on monitoring crop dynamics in Australia, the EU, and Ukraine, all of which indicate lower yields compared to the previous season. Given the interconnectedness within the soybean complex, most traders are also adopting a stance of neutrality, albeit with a subtle inclination towards bullishness. It’s apparent that significant growth potential may be limited at present, especially considering the already considerable positions within the EU market. This assessment is also in line with several analysts and reports.
Sunflower Oil:
Moreover, Roman Zenon Dawidowicz points out, projections hint at a decline in sun seed stocks in Ukraine, possibly in Russia as well, in the coming months. Expectations point towards a diminished sun seed crop in Ukraine during autumn, slated at 12.4 million metric tons compared to the previous season’s 12.9 million metric tons. Additionally, the pricing dynamic in India reflects sunflower oil as a more economical option compared to palm oil so analysts and reporters perceive the current scenario as neutrally to slightly bullish in the short term and predict a sideways trend for FOB Ukraine prices and a downward trajectory for FOB Russia prices for the coming month.
