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10th of May 2019 Bi-Weekly update on edible Oils & Fats - By Aveno


How bees affect the price of your salad oil

After the Easter and Labor Day breaks we noticed continued global weakness in edible oils

High palm oil stocks.

In Malaysia the local delivered price for crude palm oil dropped from 2051 Malaysian Ringgit/mt on April 19th to RM 1918 on May 6th, to rebound to RM 1946.50 on May 7th (1 RM = €0.22). High palm oil stocks in Malaysia and Indonesia keep weighing on the market and makes one wonder: “How low can you go? Let’s limbo some more… and find out”. 

Demand typically picks up before Ramadan, which started on May 5th. The Muslim festival is a month of fasting and feasting, which sees higher demand for palm oil used in cooking, leading up to Eid.
Biodiesel is and will be the main price support of palm oil in the coming months. The Malaysian government has raised its blending mandate from 7 per cent in 2018 to 10 per cent in 2019. And in a recent interview François van Hoydonck, ceo of Belgian Palm oil Producer SIPEF, reminded us of the Indonesian plans to increase the mandatory mixing of B20 to B30 (30% palm methyl esters addition in mineral diesel), which would pull out of the market about 4.5 million tons of palm oil per year. Total world production of palm is 73 million tons, so this could positively impact prices. Market analysts also expect exports of biodiesel from Malaysia to reach 700,000 tons this year (37% increase vs. 2018) mainly to EU and we see numerous initiatives to produce clean aviation fuels based on palm oil…

Source: Malaysian Palm Oil Board (MPOB)

Swelling soybean stocks

Pressured down by the biggest ending stocks in American history (900 million bushels or 24.5 million mt) the price of soybeans in the US collapsed. Even if trade talks with China smoothen the relation it is near impossible to bring down US ending stocks to normal levels of 350-400 million bushels because, China would need to take 30 million mt of US soybeans still this year plus an additional 12 million mt next year. But two things are preventing this:
  • African swine fever : China needs to kill 200 million pigs and this situation is also deterring breeding pigs in China,….. so demand for soybean meal went away.
  • The present record harvest yields in Brazil and Argentina urge exporters to ship the crop as quickly as possible and they benefit from their weaker currency (real and peso) against the dollar. Oversupply is not limited tot the US and Chinese buyers have more incentive to buy cheaper in South America. 
The YTD price evolution of crude soybean oil in the U.S., shown in this graph, is in $ per pound. May 7th the price was $0.2710 per pound.

Source: macrotrends.net/2538/soybean-oil-prices-historical-chart-data

Rapeseed oil price is holding ground.

The end of the rapeseed season in EU looks a bit complicated but more important are the uncertainties around the production this and next season. So far weather conditions seem OK going to the harvest starting in june.

The EU’s ban on neonicotinoids also affects planting decisions because it leads to lower rapeseed yields and reduced profitability. For next season the production is forecast to decline eight percent to 18.43 million tonnes. The output in 2018 was 10 percent below the previous year, so that would make two disappointing crops in a row...

Neonicotinoids are very good at killing insects. These insecticides are neurotoxins that work by disrupting receptors in an insect's central nervous system, causing paralysis and death of crop-destroying pests. According to the European Food Safety Agency (EFSA) most uses of neonicotinoid pesticides represent a  risk to wild bees and honeybees. Therefore three neonicotinoids – clothianidin, imidacloprid and thiamethoxam – are currently subject to restrictions in the EU because of the threat they pose to bees.

source: IGC

Petroleum climb halted?

Long term it seemed that petroleum prices were on a rising trend, driven by the US policy to isolate Iran as a supplier of crude oil. But petroleum did not break through the $75/barrel barrier. The global slowdown in economic growth eases demand and production levels (up or down) agreed by OPEC, the fall in Venezuelan production and restrictions on Iranian exports are expected to balance the market. Analysts foresee a price range of $65-70/barrel.
Source: Oil price.com

The diverging development of European and American economies is expected to further delay the convergence of interest rates. The European Central Bank foresees key interest rates to remain unchanged through 2019 and the USD/EUR exchange rate is expected to stay relatively stable around current levels for the next few months… ( ?)
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“Prediction is very difficult, especially if it’s about the future…”
- Niels Bohr, Danish Nobel Prize winning scientist)

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