Vegoils commentary: CPO futures firm, backed by strong exports

Crude palm oil (CPO) futures rebounded on Monday March 25 to regain losses at the close of last week, spurred by a firm export performance, while production estimates were on the lower end of expectations.

The most active third-month CPO futures contract for June-delivery on Bursa Malaysia moved up 1.46% to 4,249 ringgit ($896) per tonne. The contract started lower following weakness late on Friday March 22 in related vegoils, but it quickly shed losses to move into positive territory. 

Chinese vegoils ended mixed on Monday, with the most active palm oil contract on the Dalian Commodity Exchange recovering from earlier lows to move 0.6% higher to 8,372 yuan ($1,158) per tonne. It tracked CPO futures on the BMD, while the equivalent soybean oil contract dipped 0.84% to 7,838 yuan per tonne.

The most active rapeseed oil contract on the Zhengzhou Commodity Exchange slid 0.93% to 8,320 yuan per tonne.

CPO futures received support from a firm export performance, with cargo surveyors Intertek Testing Services, Société Générale de Surveillance and Amspec Agri Malaysia pegging Malaysian palm oil exports for the first 25 days of March at 13-21% higher on the month, to 997,825-1.08 million tonnes.

The pace has improved from that seen in exports for March 1-20, with levels already exceeding or nearly exceeding those seen for the full month of February.

Meanwhile, the Malaysian Palm Oil Association (MPOA) has pegged Malaysian production for the first 20 days of March 2.98% higher compared with February, with the 9.9% rise in Peninsular Malaysia production offset by a 6.96% drop in East Malaysia.

The MPOA’s figures represent about 40% of the total oil palm planted area of Malaysia, with members including several plantation bellwethers, and the estimates tie in with earlier March 1-20 estimates from brokerage UOB Kay Hian at 2-5% higher on the month.

Some market participants had expected double-digit monthly growth in Malaysia’s March output following better weather and a slightly higher number of working days, with some now anticipating a more moderate increase of around 4-8%

In the physical market, trading was relatively muted while India celebrated the Holi festival, with offers of CPO to west coast India heard around $1,030 per tonne CFR for April shipment and $1,017.50 per tonne CFR for May.

Olein offers to China were at $995 per tonne CFR for April and $982 per tonne CFR for May. 

The Indonesian government is contemplating revising its domestic market obligation (DMO) policy to tie it to production instead of exports, trade ministry officials said at a local news conference on Monday.

The current DMO policy requires sellers to sell cooking oil locally before they are allowed to export palm oil products overseas, with the permittable export volume dependent on the volume and type of cooking oil sold locally.

The consideration stems from the decline in exports seen over the last two months, with palm oil product exports reported at 1.89 million tonnes in January and 1.01 million tonnes in February, which could affect local cooking oil supply.

No elaboration was given as to how the policy would be revised, though market participants told Fastmarkets that the discussion was still in very early stages, and that it hard to tell if any changes will be made.  

In the Americas, soyoil futures surged, with underlying support from palm oil and crude prices. 
 
The May soyoil contract on the Chicago Mercantile Exchange (CME) had soared 2.3% to 48.73 cents per lb at the time of publication, paring Friday’s losses.
 
The 1.4% increase in Malaysian palm oil futures in the morning supported the market, as did a spike in WTI crude contracts.

Soymeal futures rose 0.5% on the day despite downward pressure from product spreading dynamics, with May CME contracts trading at $340.80 per short ton at the time of publication.
 
The US Department of Agriculture (USDA) attaché’s downward revision of the Brazilian soybean crop added to market optimism, indicating a potential tightening of soybean availability.
 
The USDA on Thursday March 28 will publish its grain stocks and planting intention reports, with positioning having already taken place.

In the physical market, soyoil on a May-loading basis in Argentina fell 0.95 cents per lb on Monday, assessed at a discount of 7.8 cents per lb to May futures.

After Fastmarkets’ assessment, 5,000 tonnes of Argentinian soyoil for April loading traded at a discount of 6.9 cents per lb to May futures.

The May soyoil basis in Brazil rose 0.5 cents per lb day on day, assessed at a discount of 6.75 cents per lb to underlying futures.

On Friday, also after Fastmarkets’ assessment, 1,000 tonnes of Brazilian soyoil for May loading traded at a discount of 7 cents per lb to May futures.

Brazilian soymeal for May loading rose $1 per short ton, assessed at a premium of $3.50 per short ton to underlying futures, while soymeal in Argentina on the same basis was assessed at a premium of $5.50 per short ton to May futures, down $2 per short ton from Friday.

The European sunflower and rapeseed oil markets were broadly stable on Monday.

Offers for rapeseed oil for April delivery strengthened over the day to €939 per tonne from €935 per tonne in the morning, while April bids followed to €920 per tonne from €912 per tonne.

Front-month prices rose by about €9.50 per tonne to €929.50 per tonne as a result.

Rapeseed oil was heard to have traded at €917 per tonne for August, September and October delivery and at €925, €926 and €929 per tonne for November, December and January delivery.

Offers for sunflower oil at six European ports for April, May and June delivery were made at $945 per tonne throughout the day, drawing bids of $930 per tonne.

This left prices stable day on day at $937.50 per tonne.

No trades were heard for sunflower oil at six European ports.