Vegoils commentary: Asian vegoils tumble on softer CPO export prospects

Crude palm oil (CPO) futures slid for a second consecutive session on Thursday April 25, with downward pressure coming from weaker rival oils and indications of softer export demand.

The most active CPO futures contract for July-delivery on the Bursa Malaysia exchange fell by 1.73% to 3,874 ringgit ($810) per tonne — regaining some of the losses seen at the end of the morning trading session, when the July contract closed at 3,850 ringgit tracking weaker overnight values from soybean oil futures on the Chicago Mercantile Exchange (CME) and other Asian vegoils.

Chinese vegoils slid in tandem with the overall softer vegoil complex, with the most active September palm oil contract on the Dalian Commodity Exchange falling by 2.58% to 7,314 yuan ($1,009) per tonne while the equivalent soybean oil contract dropped by 1.22% to 7,558 yuan per tonne.

The September rapeseed oil futures contract fell by 1.36% to 8,264 yuan per tonne, erasing nearly all the gains from earlier in the week.

Production estimates from the Malaysian Palm Oil Association (MPOA) for April 1-20 were reported 4.5% higher compared with the corresponding period of the previous month, on the lower end of earlier estimates by UOB Kay Hian which showed a 3-7% increase for the period.

Meanwhile, Malaysian palm oil export estimates for April 1-25 from cargo surveyors Intertek Testing Services (ITS), Amspec Agri Malaysia and Société Générale de Surveillance (SGS) were mixed, with ITS pegging a 1.53% increase on the month to 1.10 million tonnes, while Amspec and SGS reported a drop of 0.49% and 6.6% from their respective March 1-25 estimates to 1.04 million tonnes and 931,938 tonnes respectively.

This is a slower pace compared with the export growth reported for April 1-20, where cargo surveyors reported month-on-month growth of 6.96-14.32% to 745,803-905,515 tonnes.

In the physical market, Chinese buyers were more active, with trades reported at $869 per tonne CFR for June-July shipment, $870 per tonne CFR for July and $858-860 per tonne CFR for August shipment, with total traded volume estimated around 100,000 tonnes.

Indian buyers also picked up CPO for May and August shipment at $930 and $900 CFR east coast India respectively, with offers heard around $942.50 per tonne CFR west coast India for May shipment and offers for June and July cargoes heard at $932.50 per tonne CFR and $922.50 per tonne CFR.

With the drop in CPO futures over the past two days, some market sources are now anticipating Indonesia’s CPO reference price for May to show a smaller increase from April, with the change effectively keeping export taxes for CPO unchanged at $124 per tonne instead of the $169 per tonne expected earlier.

The Indonesian trade ministry has yet to issue the new reference price for May, though the announcement is expected in the coming days.

In the Americas, soyoil futures remained on a downward trend on Thursday, although prices bounced back from intra-day lows.

July soyoil contracts on the CME dropped by 0.5% on the day to trade at 45.04 cents per lb at the time of publication.

The market had a somewhat choppy trade, with prices rising slightly during the overnight session and falling as much as 1.5% during the day before finding some support and erasing part of the losses.

Asian vegoil futures tumbled and crude prices softened, with weakness flowing through to the soyoil market while investors continued to address whether the uptick in soyoil futures seen on April 19-23 was overdone.

The backdrop in prices was capped by product-spreading dynamics and good US soyoil export sales and shipments.

The US sold 16,200 tonnes of soyoil in the week to April 18, compared with only 100 tonnes in the previous week and above market expectations that ranged from net reductions of 5,000 tonnes to net increases of 10,000 tonnes, the US Department of Agriculture (USDA) showed.

The spike in sales was underpinned by the narrowest spread between soyoil prices in the US and South America since July 2022, which opened arbitrage opportunities for US exporters.

Net soymeal export sales totaled 307,900 tonnes, within market expectations of 100,000-400,000 tonnes.

Soymeal futures fell on Thursday, paired gains from the previous day and put an end to four consecutive sessions trading in green territory.

The July CME soymeal contract fell by 0.9% on the day, trading at $346 per short ton at the time of publication.

Argentina’s soybean farmer sales lost momentum in the week to April 17, but field works are expected to pick up from the coming week due to drier weather — which could put some downward pressure on South American premiums across the soy complex.

In the physical market, the Argentinian soyoil basis for June loading fell by 0.1 cents per lb on Thursday, assessed at a discount of 7 cents per lb to the CME July futures contract.

In Brazil, the June basis was unchanged day on day, assessed at a discount of 6.7 cents per lb to July futures.

The soymeal basis for June loading in Brazil rose by $2 per short ton day on day and was assessed at a premium of $4.50 per short ton, while in Argentina the same basis was seen at a premium of $6.50 per short ton, up by $0.50 per short ton compared with the previous assessment.

Rapeseed oil prices at European ports continued to rise from both sellers and buyers compared with Wednesday’s indications.

Offer levels were shown by sellers at €981 ($1,049) per tonne FOB Rotterdam, up by €10 per tonne from the day before, against buyers’ ideas of €970 per tonne FOB Rotterdam, up by €15 per tonne from the day before, for May loading.

Sunflower oil in the Black Sea region was offered inactively at prices starting from $885 per tonne CIF Mersin, against buyers’ ideas of $865 per tonne CIF Mersin for delivery in May.

On Thursday, Fastmarkets heard about a sunflower oil trade at $840 per tonne FOB Chornomorsk with May shipment and $935-940 per tonne CIF China with delivery in June.

Sunflower oil to India was offered by Ukrainian sellers at $960-965 per tonne CIF India, delivery in May-July, while buyers’ ideas were heard at $950-955 per tonne CIF India.

The range of purchase prices for sunflower crushers remained quite wide at 15,800-17,000 Ukrainian hryvnia ($397-427) per tonne CPT plant, including VAT, and was determined by the region of purchase and oil content.

Ukrainian farmers have sowed 38% or almost 2 million hectares of sunflowers as of April 25.

The Russian government has updated export duties on sunflower meal and sunflower oil for May, leaving the duty on sunflower oil at zero and lowering the export duty on sunflower meal by 30% to 2,389.60 rubles ($26) per tonne.