Vegoils commentary: CPO up, CME soyoil flat despite surging meal

Crude palm oil (CPO) futures closed in positive territory on Thursday May 2 after trading resumed following the Labor Day/Workers’ Day holiday, recovering some of the losses seen earlier this week.

The most active third month CPO futures contract for July delivery on the Bursa Malaysia exchange rose by 0.68% to 3,844 ringgit ($806) per tonne, with trade movement starting off rangebound tracking softer crude oil values mixed with stronger overnight soybean oil futures on the Chicago Mercantile Exchange (CME).

The sideways movement continued through the rest of the afternoon before some bargain buying lifted CPO futures to end in positive territory.

Chinese vegoil futures trading was absent because both the Dalian Commodity Exchange and Zhengzhou Commodity Exchange were closed on Thursday for a national holiday, with trading to resume on Monday May 6.

Full-April production estimates from the Southern Peninsular Palm Oil Millers Association (SPPOMA) were reported 3.76% higher compared with March, slightly lower than the 4.11% increase reported for April 1-25.

Output estimates from the Malaysian Palm Oil Association (MPOA) for the whole of Malaysia are expected over the next few days, which will give further insight into Malaysia’s production performance.

Production for April is anticipated to show an increase from March, while exports are tipped to be lower following estimates from cargo surveyors which pegged Malaysian palm oil exports for April at around 9-11.5% lower on the month.

Initial forecasts at the start of the month from industry analysts had put exports at flat to around 8% higher from March. But the slowdown in Malaysian exports is possibly indicative of the demand rationalization seen with palm oil maintaining a premium to its rivals for most of April, prompting buyers to switch to cheaper alternatives or reduce demand.

A strong production performance would likely cause month-end stocks for April to show an increase from March and reverse the slide seen in Malaysian palm oil inventories, which have fallen for five months straight.

Meanwhile, in the physical market, a small volume of CPO was reportedly traded to India for May shipment at $932 per tonne CFR west coast India, while offers were heard around $935 per tonne CFR west coast India for May, $925.00-927.50 per tonne CFR for June and $907.50 per tonne CFR for cargoes shipped in July-September, with buying ideas around $8 per tonne lower.

In the Americas, soymeal futures soared on Thursday, while soyoil prices were broadly unchanged despite downward pressure from product-spreading dynamics.

The July soyoil contract on the CME was trading 0.4% higher on the day at 43.43 cents per lb at the time of publication.

Downward pressure from product-spreading dynamics was partly offset by higher soybean prices and a firmer tone in the Malaysian palm oil market.

Meanwhile, soymeal prices surged despite the announced end of the crushing industry workers’ strike in Argentina.

The July CME soymeal contract surged by 3.9% on the day to $362.7 per short ton at the time of publication, the largest daily jump since November.

The steep increase lifted meal futures to the highest level since early February amid mounting concerns that further strikes could disrupt economic activities in Argentina in the coming weeks.

Excessive rain in Brazil’s southernmost state of Rio Grande do Sul provided further support to the market.

“Flooding in Brazil’s Rio Grande do Sul and talks of resumption of strikes in Argentina have triggered a bullish rally in CME soymeal, as the dwindling oil share has required a higher meal share to sustain crush margins,” head of research at Mumbai-based brokerage Sunvin Group Anilkumar Bagani said.

The CME implied soybean crush margin had fallen to a nearly two-month low overnight.

Short-covering on the soybean market helped trigger the upsurge in meal prices, according to Marex’s head analyst for grains and oilseeds Terry Reilly.

“Physical soybean meal buyers don’t like it when they see short-covering in soybeans,” Reilly said, adding that funds are already long on meal.

In the physical market, South American soyoil bases fell on Thursday.

The Argentinian soyoil basis for June loading dropped by 0.85 cents per lb from Tuesday, ahead of the holidays in Brazil and Argentina, assessed at a discount of 6.2 cents per lb to the July CME futures.

In Brazil, the June basis edged lower by 0.45 cents per lb to a discount of 5.95 cents per lb to the same futures contract.

South American soymeal premiums for June loading fell by $1 per short ton in Brazil, compensating for the gains in CME soymeal futures, but rose by $0.5 per short ton in Argentina.

The June soymeal basis was assessed at premiums of $5.50 per short ton in Brazil and of $11 per short ton in Argentina, both over the July CME futures.

Rapeseed oil offers at European ports for May loading fell by €50 per tonne on the day to €1,000 ($1,068) per tonne FOB Rotterdam, against buyers’ ideas of €970 per tonne FOB Rotterdam, which is €20 per tonne above levels indicated earlier in the day.

At the same time, offers for June loading decreased by €13 per tonne on the day to €983 per tonne FOB Rotterdam, while buyers’ ideas remained stable at €960 per tonne FOB Rotterdam.

That said, rapeseed oil trading was fairly strong on Thursday, and Fastmarkets heard of several deals concluded on an FOB Rotterdam basis: €941 and €945 per tonne for delivery in August/September/October and €946 and €952 per tonne for loading in November/December/January.

Sunflower oil in six European ports for delivery in May-June was offered at the same levels as the day before — $965 per tonne FOB, against buyers’ ideas of $945 per tonne FOB, down by $5 per tonne on the day.

At the same time, sunflower oil for delivery in the third quarter — when a reduction in supply is expected against the background of a decrease in crush due to low sunflower stocks — jumped by an average of $15.00 per tonne to $980.00 per tonne FOB, against bids at $967.50 per tonne FOB, which is $17.50 per tonne higher than the day before.

Sunflower oil in six European ports for July/August/September delivery traded at $975 per tonne FOB on Thursday.

Trading in the Black Sea region remained subdued, with Mersin CIF offer levels shown at $890 per tonne, against buyers’ ideas of $870-873 per tonne CIF for May delivery.

Offers of sunflower oil as well as buyers’ ideas for delivery in June were not heard on Thursday.

In April, 628,447 tonnes of sunflower oil were exported, which is the highest monthly export volume since the beginning of 2024.

Total sunflower meal exports reached 560,169 tonnes in April, the highest monthly export volume since the start of the 2023/24 season in September.

In other news, Ukrainian farmers managed to sow 56% or almost 3 million hectares of sunflowers.