A negative sentiment in the rapeseed oil market and firmer prices for palm oil.
(January position, refined, in euro):
Prices for edible oils and fats remained fairly stable. The prices emerged from the interactions between buyers and sellers and according to the economic theory market prices converge at a point where the forces of supply and demand meet. We observe different supply and demand situations with some oil prices strengthening a bit and others weakening a bit.
Market evolution in the last 2 weeks
- Rapeseed oil î about € 28/t
- Sunflower seed oil î about € 13/t
- Palm kernel oil î about € 6/t
- Coconut oil î about € 10/t
- Palm oil ì about € 16/t
- Soybean oil ì about € 10/t
- EU butter è price stable at € 367/100 kg
Evolution of Belgian butter prices in the last five years.
Global fish oil supply is tight but olive oil is in ample supply. In Spain (biggest olive oil producer) cooperatives are very concerned with the record high stocks from the old crop while growing conditions for the new season (so far) look OK. Prices are at the lowest in 5 years and below production cost. Following a ruling from the World Trade Organization about the American complaint that Europe subsidizes the Airbus production, the Trump administration imposed import tariffs for several EU products of which 25% for bottled Olive Oil from Spain. Meanwhile EU officials announced they will subsidize olive growers to help them deal with US tariffs (companies will receive money to buy and store excess olive oil).
Present weather-related harvest delays
(too wet) in the US and planting delays in South America (too dry) support soybean prices. After a wet spring which delayed US plantings and after a warm September providing more growing time, now Canada is sending colder air over some states. A major winter freeze and snowstorm could end the growing season for many immature soybean fields in the northern Midwest. It remains to be seen if they get a ‘killing freeze’ (-2.2C°) although these temperatures would not be unusual for this time of year.
The big sunflower seed harvest In Russia and Ukraine is near complete and it looks like sun oil will stay weak in the 2019/20 marketing year. Demand for oil in Northern Africa is very good and Egypt already switched from buying soybean oil to sun.
A negative sentiment in the rapeseed oil market
Following a negative sentiment in the European biodiesel markets was caused by earlier biodiesel stock building ahead of the winter season. The extent to which these stocks will be drawn down will determine the further price direction for oil. But it needs to be noted that the seed situation remains unchanged, tight.
Palm oil firmed on biodiesel policies In Malaysia and Indonesia and on forecasted Chinese and Indian demand. Malaysians hope that palm oil prices will strengthen in 2020 on the back of increased demand from their B20 blending mandate which will boost palm oil demand by half a million metric tons. But at the same time Malaysian palm oil production is expected to increase to 22.2 million tons in 2020 coming from about 21 million in 2019 and 19.5 million in 2018. Funding will also be given to the Malaysian Palm Oil Board to help boost demand for palm oil internationally and to counter anti-palm oil lobbying.
India has been considering restricting imports from Malaysia after Kuala Lumpur criticized New Delhi for its actions in Kashmir. But India can import from Indonesia where the rising palm oil production is sending inventories to higher levels.
Noteworthy is an analysis from the Paris based International Energy Agency saying that improving security of supply is a fundamental reason for the biofuel policy implementations in China, India and Indonesia. Higher vehicle ownership (linked with economic growth) contributes to an increasing petroleum dependency, meaning that measures to reinforce security of supply are crucial. E.g. India’s petroleum demand will grow 25% by 2024. So combined, these countries will account for a big increase in biofuel production growth in the coming years. The analysis doesn’t mention electric cars or climate change concerns.
BRENT Petroleum price oct 23rd $59.42
US Dollar (USD): latest (22 October 2019): EUR 1 = USD 1.113
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