- Chicago soybean oil futures followed Malaysian palm oil markets higher on Tuesday. The latest data from Malaysia shows that production is recovering from last year’s sharp decline, with February output reported at 21% over a year ago. However, stocks declined for the third consecutive month and are sitting at decade old lows. Palm oil is the world’s largest consumed vegoil, and Malaysia is the second largest producer (behind Indonesia). Production is expected to be 10% larger than a year ago, but the current tight stocks level is expected to add to world vegoil price volatility, as monthly swings in supply or demand have a greater impact on changes in stocks.
- Soybeans traded in a very broad range around unchanged through Tuesday, before ending firm. May soybeans found early support back under $10, while a burst of technical trading at midday stalled above Monday’s high. In the soy product markets, soybean oil marked strong gains while soybean meal was mixed on old crop weakness. The Brazilian soybean processors association ABIOVE, reported a membership processing rate of 2.1 million mt for the motnh of January. ABIOVE memberhsip represents about 78% of the total Brazilian crushing industry which implies a total January crush near 2.7 million mt, which is a 21% increase over last year and the largest January crush on record. That increase looks to be largely due to the early harvest and large available supplies. ABIOVE members also reported that they bought 3.3 million mt of soybeans, and end of January stocks were 2.9 million mt, both of which were record large. Chicago soybean markets are marking time ahead of the end of month USDA reports, and we doubt that much of a trend in either direction develops in the next two weeks.
- As far as corn is concerned, we have previously and recently reported the complete lack of any evidence that a hot/dry pattern lies in the offing in Brazil into the early part of April. The lack of dryness in turn promotes a rather mild temperature profile, and it is possible that the S American crop estimates are still 1-3 million mt too low. As such, the US Gulf market needs to find demand, which it is working towards, but a weak cash market does little to promote speculative interest in futures. Gulf basis for June rests at the lowest level since 2010. However, amid ongoing favourable weather in S America and a faster than expected pace of harvest in Argentina, an expansive crop problem is needed this spring/summer to sustain price rallies.
- This week’s decision by Turkey to essentially ban Russian imports may last longer than expected, but the market’s focus remains centered on the coming major weather pattern shift in the US. Indeed, should HRW yield meet or exceed trend the market will have to look for additional export demand. However, the market is likely to find additional usage in the near term. Even higher protein Gulf HRW is offered some $2-7/mt below comparable Black Sea origin into May, and Russian offers are unchanged despite the potential loss of the Turkish market. Lower protein HRW and Gulf SRW are again the world’s cheapest origins, and so a bearish outlook remains not advised. The US weather forecast is little changed. Despite a lack of moisture projected this weekend across the Western HRW Belt, several additional heavy rain events are advertised in the 7-15 day period. Snow cover is in retreat across W Canada and the US N Plains, and severe snowmelt should not be an issue for the N American spring crop.