Vegoils commentary: Asian vegoils surge ahead of Chinese holiday

Crude palm oil (CPO) futures rose to a near 17-month high on a combination of stronger values in the wider vegetable oil and energy complex, a weaker ringgit and bullish sentiment.

The most-active third month CPO futures contract for June-delivery on Bursa Malaysia (BMD) closed 2.06% higher day on day at 4,401 ringgit ($926) per tonne, the highest since early November 2022, with the open interest on the BMD reaching a record high of 141,691 lots, indicative of positive market sentiment.

CPO futures trade opened higher, tracking rising overnight values from rival soybean oil futures on the Chicago Mercantile Exchange (CME) and crude oil prices, with support sustained throughout the day by higher Chinese vegoils futures.

Chinese vegoil futures ended the midweek higher, with the most-active palm oil contract on the Dalian Commodity Exchange (DCE) jumping by 3.25% to close at 8,570 yuan ($1,185) per tonne, while the equivalent soybean oil contract moved up by 1.1% to 7,908 yuan per tonne.

The most-active rapeseed oil contract on the Zhengzhou Commodity Exchange (ZCE) also closed higher by 1.74% to 8,254 yuan per tonne.

Both the DCE and ZCE will be closed on Thursday April 4 and Friday April 5 due to a holiday in China, with trading set to resume on Monday April 8.

Higher crude oil prices following escalating geopolitical tensions in the Middle East and Black Sea region, coupled with expectations of better energy demand, also supported CPO futures, while a softer ringgit against the US dollar also made palm oil cheaper for buyers transacting in the dollar.

The rise in CPO futures was reflected in the physical market on Wednesday April 3, with offers for olein out of Malaysia for April shipment exceeding $1,000 per tonne FOB Malaysia, while offers for CPO to India rose by $25-30 per tonne for nearby shipment periods.

Trades for olein to India were concluded at $1,027.50-1,030.00 per tonne CFR west coast India for April shipment, while CPO was traded at $1,055 per tonne CFR west coast India, also for April.

Chinese buyers were also heard picking up prompt April cargoes to mid-China to cover nearby requirements, while there were also talks of a washout — an industry term for when deals are canceled or contracts breached — for a May-shipment cargo.

Meanwhile, freight rates for vessels carrying palm oil from Southeast Asia to key destinations such as India and China were unchanged from the week before at $48 per tonne for 18,000-20,000 tonne vessels from Southeast Asia to west coast India and $36-46 per tonne for 12,000-15,000 tonne vessels from Southeast Asia to China, with limited tonnage and competition from other non-palm products keeping prices supported.

Market participants will be closing watching Malaysia’s supply and demand estimates for March from the industry over the next few days ahead of the official data release by the Malaysian Palm Oil Board on April 15, while taking directional cues from external markets with the major Muslim Eid festive holiday taking place in Malaysia and Indonesia next week.

In the Americas, soyoil futures posed moderate gains on April 3 despite the steep surge in Asian vegoil futures and a spike in prices across the complex in Europe.

The May soyoil contract in the CME rose by only 0.3% day on day, trading at 48.73 cents per lb at the time of publication.

Soyoil futures trade was two-sided on Wednesday, rising by as much as 1.4% during the session but failing to cling to those gains.

That said, this was the fourth consecutive upswing in soyoil futures, accumulating increases of over 2% since Wednesday March 27.

May soymeal CME contracts were up by 0.8% day on day to $331 per short ton at the time of publication.

Underlying support came from a rebound in grains futures after steep declines on Tuesday April 2.

The loss of momentum in soyoil futures during the session also helped underpin the soymeal market by shaving off some of the downward pressure from product spreading dynamics.

In South America, the soyoil and soymeal basis rose on Wednesday.

The Argentinian soyoil basis for May loading was assessed at a discount of 7.65 cents per lb to the CME May futures, up by 0.35 cents per lb from the previous assessment.

The same basis in Brazil was also up by 0.35 cents per lb compared with Tuesday and assessed at a discount of 6.40 cents per lb to CME May futures.

A 30,000 tonnes cargo of soybean methyl ester biodiesel was rumored to have been traded with no further information, which could not be confirmed by the time of publication.

The Brazilian soymeal basis for May loading was at a premium of $8 per short ton to CME May futures, up by $4.50 per short ton from the previous assessment.

In Argentina, the same basis rose by $0.50 per short ton compared with Tuesday and was assessed at a premium of $7.50 per short ton to underlying futures.

The sunflower oil market at six European ports, despite strengthening prices, was slow on Wednesday, with offer levels for July/August/September loading $10 per tonne higher since the market opened to $980 per tonne FOB, while buyer estimated of workable levels were at $975 per tonne FOB.

Rapeseed oil in European ports for shipment in May/June/July rose by €10-20 per tonne per day to offer levels of €950 ($1,021.19) per ton FOB Rotterdam, against buyer ideas of €930 per ton FOB Rotterdam.

In addition, several trades were heard for rapeseed oil FOB Rotterdam on Wednesday, which were on average €10 per tonne higher than the day before: €935 per tonne and €937 per tonne for shipment in May/June/July and €935 per tonne, €937 per tonne and €940 per tonne for loading in August/September/October.

Sunflower oil in the Black Sea region was not actively offered to Turkey, while offers to India were active for the second day in a row.

Sunflower oil for May delivery to the port of Izmir was offered at $890 per tonne CIF against buyers’ idea of $865 per tonne CIF.

Sunflower oil of Black Sea origin for delivery in May-June was offered at $970-975 per tonne CIF India, while the trade level for sunflower oil of Russian origin was heard at $965 per tonne CIF for delivery in June.

According to Indian sources, about 80,000 tonnes of sunflower oil of various origins — Ukraine, Russia, South America — were traded yesterday for delivery between April and June.

In addition, Fastmarkets heard about a trade for soybean oil produced in South America at a price of $985-990 per tonne CIF India with delivery in May.