A negative sentiment in the rapeseed oil market and firmer prices for palm oil.
Market evolution in the last 2 weeks
(January position, refined, in euro):
- Rapeseed oil lost about € 28/t
- Sunflower seed oil lost about € 13/t
- Palm kernel oil lost about € 6/t
- Coconut oil lost about € 10/t
- Palm oil gained about € 16/t
- Soybean oil gained about € 10/t
- EU butter 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
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Unless otherwise mentioned the crude oil values quoted in these documents are prices landed in EU without import duties, handling, storage, financing, refining, packing, transport or any other cost related to bring the product to market. They are used as market trend illustration. Substitution of oils is possible but different oils have different fatty acid profiles and are not all interchangeable for all applications. One can make biodiesel from all oils and fats but one cannot make mayonnaise from coconut oil. This document is exclusively for you and does not carry any right of publication or disclosure. This document or any of its contents may not be distributed, reproduced, or used for any other purpose without the prior written consent of AVENO. The information reflects prevailing market conditions and our present judgement, which may be subject to change. It is based on public information and opinions which come from sources believed to be reliable; however, AVENO doesn’t guarantee the correctness or completeness. This document does not constitute an offer, invitation, or recommendation and may not be understood, as an advice. This document is one of a series of publications undertaken by AVENO and aims at informing broadly a targeted audience about the edible oils & fats market. AVENO’s goal is to keep this information timely and accurate however AVENO accepts no responsibility or liability whatsoever with regard to the given information.
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