Soya Oil Special: Easing Supply from SA to Push Prices Lower from Multiyear high

MUMBAI (Commodities control)- South America is the centre of attention for edible oil complex currently as the market awaits the fresh supply from the fields. As market from move towards peak soybean crushing seasonality of South American suppliers, it will be interesting to see if that would suffice the defecit the market is trading currently and being down the prices.

The aggressive bullish movement in edible oils and oilseeds complex in past four weeks took the market to test fresh highs in many years. Sunflower oil Black sea FOB gained the most amongst all oils to rise by $400 or 31% in last four weeks to trade at $1710 /MT. While Argentina Soy oil FOB rose to $1248/MT up by $200 or 16% in same time frame and crude palm oil FOB Indonesia were up by $70/MT or 6% to $1115/MT. Sun oil and palm oil prices reached their highest in 13 years while Soy oil in 8 years.


Indian markets are mirroring the global prices plus very high import duties, taking all edible oil prices to a record high levels. Year on year increase in wholesale price is 40% in mustard oil, 52% in sunflower oil, 34% in refined soya bean oil, 33% in refined rice bran oil and 37% in refined palm oil. Retail prices are at least 20% higher than wholesale rates.


Recent trigger for the price rise has been the deteriorating weather in South America in addition to the lower-than-expected palm oil production and falling palm oil stocks and rapidly declining sun oil stocks at the origin.


Sun oil prices are commanding unusually high premium over the rival soft oils and palm oil. Price sensitive consumers have already started switching to the cheaper soy oil pushing the Argentina Soy oil FOB to unusually high levels. The Soy oil production will increase as the crush season peaks during April/June 2021 quarter in South America. Palm oil prices have gone through the roof due to the anticipation of lower production along with falling palm oil stocks at the origins. The supply of palm oil will revive as per higher production seasonality during March/August.


Soy oil: Weather Anomalies Delays Supply From SA, But Production Set to Make New Record.


Global Soybean Oil

Soy oil has been one of key edible oils driving the prices of the whole complex higher. Tightening soybean stocks in US, slower harvest in Brazil and dry weather in Argentina all culminated together to seed a steep rise of soy oil prices in last few weeks. Lower than expected stocks of palm oil and squeeze in Sun oil supply from Ukraine and Russia also exaggerated the soy oil price rally.


South American soybean harvest from Brazil have almost finished but Argentina will begin within a few weeks from now. Production in Brazil is expected to touch 134 M MT a record high. While USDA estimated Argentina to produce around 48 M MT.


Higher soybean prices and depreciated Brazilian real are likely to draw huge soybean farmer selling in coming weeks easing supply of soybean globally. Higher crush margin for meal and oil will lead to aggressive exports of oil and meal from Argentina. Weak Argentina peso is the cherry on top for the exporters.


Our market sources suggest that there’s record high shipment line up at Brazilian ports for exports of Soybean and soybean oil as on 1st week March. Most exports are en-route to Asia, more specifically China. There was an operational delay at the ports till last week of February 21 due to acute shortage in containers. With that problem being slowly addressed, the shipments are expected to reach the destinations by end of March and early April. These shipments will have huge impact in easing supply of soybean oil and meal and their prices.


Higher demand for veg oil-based biodiesel is now contributing to additional consumption. As long as crude oil prices are hovering around $60-$70 per barrel it will limit the downside in soy oil prices. Brazil, EU and US are major consumers of biodiesel.

Indian Scenario: High Production, lower imports


Soybean crushing in India has been robust resulting in ample soy oil production. The crush margin for soybean crushers has been positive due higher global soybean meal and oil prices. Higher local soybean crush made sure ample availability of locally produce oil market on other hand higher global prices made sure lower import.

India Soybean Oil Price Outlook


The peak crushing season in Argentina and Brazil from April onwards will result in imported oil fighting to get back their market share in their biggest export market, India. It will pressurize the local soy oil suppliers to compete with imported soy oil prices. To retain their market-share local suppliers will be compelled in bringing the prices down.


NCDEX Ref soy oil prices are looking bearish in medium term. We expect futures to trade lower towards 1150 to 1180 Rs/10 KG in coming one or two months.

India Soy Oil Bs in Million MT
Attribute	2016/2017	2017/2018	2018/2019	2019/2020	2020/2021
Crush	9.00	7.70	9.60	8.40	9.60
Beginning Stocks	0.47	0.48	0.17	0.14	0.15
Production	1.62	1.39	1.73	1.51	1.73
Imports	3.53	2.98	3.00	3.61	3.80
Total Supply	5.63	4.85	4.90	5.27	5.68
Exports	0.00	0.01	0.01	0.02	0.02
Industrial Dom. Cons.	0.00	0.00	0.00	0.00	0.00
Food Use Dom. Cons.	5.15	4.67	4.75	5.10	5.47
Feed Waste Dom. Cons.	0.00	0.00	0.00	0.00	0.00
Domestic Consumption	5.15	4.67	4.75	5.10	5.47
Ending Stocks	0.48	0.17	0.14	0.15	0.20