- Chinese soybean oil prices rallied to new two year highs to start the week on shrinking domestic supplies and strong demand. Last week’s rapeseed reserve auction sold out with prices rising and the quickening price rally has some wondering if China does not become more active in canola and soybean markets to help bump up supplies. China will want to pressure domestic prices heading into the Lunar New Year which comes early this year on Jan 28th.
- Having said that, we saw early prices ease on hedge selling although that did not last with soybean futures pushing above 50 and 200 day moving averages and the grains are tagging along – for now. It seems the funds are back covering their shorts whilst farmer selling has slowed, both pressuring markets to the upside.
- Chinese demand for soy products remains robust with sharp domestic rallies noted overnight. Chinese soybean meal users continue to add to coverage which is partially related to the decline in DDG availability and also due to strong profit margins for pork producers. Chinese soybean oil prices broke out to the upside and domestic end users are adding to their coverage. The Chinese are more active securing US soybeans amid their rising soy product prices and crush margins. As ever, China is the key importer to watch as their activity so often dictates price direction.
- Brazil could import record amounts of US corn ethanol as their prices soar due to reduced cane production. Brazil could import 1.2-1.4 billion litres of ethanol, mostly from the US. The US ethanol export opportunity is solid amid rising crude oil values and this along with heady corn demand in the world feed market will help in furthering the current Chicago rally.