Weak performance of oil and fat during the Spring Festival holiday
Chinese Oils and Fats 2024-02-19 16:01 Shaanxi
During the Chinese New Year holiday, the international oil market was generally weak, with the March contract price of soybean oil dropping from above 48 cents per pound to 45.8 cents per pound, giving up most of the gains from the week before the Spring Festival holiday. The Malaysian palm oil futures price rose and fell, ultimately closing near the closing price of RM3808/ton on February 8th. Overall, it has not yet escaped the oscillation range, but compared to soybean oil, it has shown significant resistance to decline.
Baocheng Futures Senior Oil Analyst Bi Hui introduced that during the Chinese New Year holiday, the US Department of Agriculture released its monthly supply and demand report for February, which showed a bearish impact that exceeded expectations. US soybean year-end inventory quickly recovered, and continued to pressure US soybean futures prices, dragging down weak soybean oil futures prices from the perspective of raw material costs.
On February 15th, the National Oilseed Processing Association of the United States released a monthly crushing report, which showed that the US soybean crushing volume in January was 185.78 million bushels, failing to continue the historical high of US soybean crushing volume set in December 2023. This is in line with the seasonal decline in US soybean crushing volume, but it decreased by 4.9% month on month, exceeding market expectations. Prior to the report, analysts estimated the median to be 190 million bushels. In terms of year-on-year data, the growth rate was 3.8%, which is still the highest level in the same period of previous years. Overall, although the demand for American bean pressing remains strong, there has been an unexpected decrease in demand, which has dragged down the futures price of American beans. Meanwhile, as of the end of January, soybean oil inventories climbed to 1.507 billion pounds, an increase of 10.8% month on month, far exceeding the average analyst estimate of 1.409 billion pounds before the report. This not only saw three consecutive months of growth, but also reached a new high since the end of July 2023.
"Against the backdrop of a month on month decline in soybean crushing volume, soybean oil inventories have recovered beyond expectations, reflecting a decrease in soybean oil demand beyond expectations. As soybean oil inventories continue to recover rapidly from low levels, the support of low inventories for soybean oil futures prices has significantly weakened. After the holiday, domestic soybean oil futures prices may follow the downward trend of soybean oil futures prices, continuing the downward trend before the Spring Festival holiday. On the first day after the holiday, they may open lower and lower, and pay attention to the impact of changes in the pace of domestic oil factory operations on domestic soybean oil inventories." Bi Hui said.
On February 13th, the Malaysian Palm Oil Authority released a monthly report showing that palm oil inventories in Malaysia fell 11.83% month on month to 2.02 million tons at the end of January, the lowest since July 2023, mainly due to the dual impact of Malaysia's continuous reduction in palm oil production and strong exports. Data shows that Malaysia's crude palm oil production in January decreased by 9.59% month on month to 1.4 million tons, the lowest since April 2023. The latest production data shows that from February 1-15, 2024, Malaysia's palm oil production decreased by 17.21% compared to the previous month, according to data from the Southern Peninsula Palm Oil Squeezers Association. In terms of exports, Malaysia's palm oil exports remained stable in January, with a month on month decrease of 0.85% in palm oil exports to 1.35 million tons. But according to the latest data, there are signs of a decline in palm oil exports. According to data released by third-party shipping agency SGS, Malaysia's palm oil exports from February 1-15 were 492700 tons, a month on month decrease of 4.32%.
"Against the backdrop of continued weakness in overseas oil and fat markets, it is expected that there will be a certain demand to make up for a decline in the domestic oil and fat market after the holiday. However, as CBOT soybeans are approaching the cost line and the South American soybean production situation may not be as optimistic, the downward space for futures prices may also be limited, with a potential margin of only 1-2%." said Shi Lihong, senior oil and fat analyst at CITIC Securities Futures.
Wang Jing, Manager of the Research and Consulting Department of Guantong Futures, believes that domestic soybean meal futures are expected to follow the weak foreign market in the context of weak domestic demand. As key data is released one after another, the short term is in the stage of selling out all the bearish positions, and bears can choose the opportunity to make appropriate level selling operations.
Source: Futures Daily