Week 45: Overview of the world veg-oil market
• After a sharp fall in the first days of November (from 757.5 USD per ton to 730 USD per ton CIF Rotterdam), crude palm oil prices recovered this week and reached 765 dollars per ton CIF Rotterdam.
• The much delayed increase of blending mandate from B7 to B10 in Malaysia is said to enter in force in December 2016. The exact date, however, is still not confirmed. It is estimated that 800,000 MT of palm oil will have to be used locally for biodiesel production which should bring down the country’s stockpiles, limit export and possibly also support palm oil prices.
• The growth of Malaysian palm oil inventories already slowed down from 5.62% in September to 1.79% in October. This is due to a decrease in production that is faster than the decrease in exports. The October inventory is at 1.57 million tons and includes both crude and processed palm oil.
• After the prices of iron ore fell down, Liberia is trying to make palm oil its main export commodity. Sime Darby and Golden Veroleum have already been granted concessions to plant more than 870,000 ha of palm trees there.
• In the US, the soybean production forecast for 2016/17 was increased by 92 million bushels to 4,361 million bushels from last month’s forecast. It is due to projections of record-high yields at 52.5 bushels per acre.
• At the same time, the crushing forecast of soybean in the US is down by 20 million bushels to 1,930 million bushels due to lower export projections, especially to Mexico, Canada, Thailand and the EU.
• As a result of lower export and higher output, the stockpiles of soybean in the US should grow. The forecast from last month has been increased by 85 million bushels to 480 million bushels for 2016/17. This can help stabilize palm oil prices.
• Higher soybean production forecast increases the forecast of total global oilseed projection by 3.1 million tons to 551.2 million tons in 2016/17.
• The demand from China in 2017 is hard to predict as the country intends to sell part of its soybean reserves which are currently at 6 million tons. Although the locally stored soybean may not be of the highest quality, low prices will compensate. Thus, part of the Chinese demand could be satisfied locally.
• USDA raised its global rapeseed projections for 2016/17 to 67.8 million tons mainly due to higher forecasts for China. However, this is still nearly 2 million tons lower than the output in 2015/16 which is predominantly due to significantly lower crops in Europe and China offset only by increased production in India.
• In the EU, there is fear that even high prices will not convince farmers to plant rapeseed as long as they do not have certainty about the plant protection products.