Overnight Weakness in Palm Oil and Meal/Oil Spreading Drive Soybean Oil Futures Lower

Overnight Weakness in Palm Oil and Meal/Oil Spreading Drive Soybean Oil Futures Lower

Better-than-expected export data and positive trade news drove nearby soybean futures about one percent higher (January contract +9 cents per bushel). Gains in deferred futures were smaller, with new-crop contracts gaining about 1/2 percent (November 2020 contract +5 cents per bushel). The export sales data included sales of almost one million tonnes to China and the announcement of a daily sale of 136,000 tonnes of soybeans to China for 2019/20 delivery. The rally drove the January contract back above $9.30 per bushel and into the channel the contract has been trading in for most of the last two weeks. However, whether prices will remain in that channel will depend on the United States Department of Agriculture’s (USDA’s) monthly supply and demand projections, scheduled for release on Friday at 11 a.m. (CST).

The strength in soybean futures contributed to a sharp rally in soybean meal futures, which triggered meal/oil spreading that drove soybean oil futures down about one percent (December contract -32 basis points per pound). The decline left the December contract back below 31.5 cents and below the low set on Wednesday. However, with bullish world fundamentals driving futures higher in Malaysia and China, the decline in soybean oil futures is more likely consolidation of recent gains and not a reversal in the trend. The drop left stochastics just below oversold and sets up 32 cents as short-term resistance, while the 10-day moving average at 31.21 is likely to provide short-term support.

Palm oil futures fell one percent (January contract -26 ringgit per tonne) on profit-taking triggered by early weakness in vegetable oil futures on the Dalian exchange and expectations that the Malaysian Palm Oil Board’s (MPOB’s) monthly supply and demand estimates could feature larger-than-expected production. The decline left the January contract below the 2,550-ringgit level, but above the lows set on Tuesday and Wednesday, which suggests the market is consolidating the recent rally.

On the Dalian exchange, palm oil futures settled more than 1/4 percent higher (January contract +20 yuan per tonne), and soybean oil contracts gained almost 1/2 percent (January contract +26 yuan per tonne). Selling at the upper Bollinger band limited the advance in the palm oil market while buying at the 5,200-yuan level reversed early losses. In the soybean oil market, prices continue to consolidate recent gains as resistance at the 6,400-yuan level limited the increase in prices.

The weakness in soybean oil and palm oil futures weighed on canola prices with most contracts down about 1/4 percent (January contract -C$1.20 per tonne). Selling at the upper end of the trading channel triggered the decline, but the 20-day moving average also acted as resistance on Thursday. Buying at the 10-day moving average limited losses, but traders were unwilling to push prices too far in either direction ahead of the USDA report.

Mixed cash prices in Europe contributed to narrowly mixed rapeseed futures with nearby contracts down less than 1/4 percent (February contract -€0.50 per tonne). Contracts with late 2020 deliveries were either unchanged or narrowly higher (August contract +€0.50 per tonne). The cash market mirrored the futures market with narrowly mixed rapeseed oil prices, while sunflower and soybean oil prices were about 0.5 euro cents per pound higher, and palm oil prices were about 0.5 euro cents per pound lower.

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