World vegetable oil prices fell following the release of monthly supply and demand data from the United States Department of Agriculture (USDA) and Malaysian Palm Oil Board (MPOB). Weakness in crude oil prices also contributed to the selling in vegetable oil prices. The MPOB report was more bearish than USDA’s, but overarching concerns about world economic activity following a late-session sell-off in equities may be the catalyst for the next move in prices.

Soybean oil futures fell a little more than 3/4 percent (July contract -23 ringgit per tonne) to settle comfortably back into the recent trading range after testing the upper limit of that range on Monday. If the sell-off in equities is the start of an increase in concerns about world economic activity, in the short term, soybean oil futures are likely to move back toward the lower end of the range near 25 cents. If the concerns are allayed in the coming days, then the July contract could move back into the range set in early April, which was between 26.5 and 28 cents.

The MPOB reported larger-than-expected production, which triggered a 2 1/2 percent decline in the most actively traded contract when trading resumed after the noon break. An overnight rally in crude oil helped palm oil limit the decline to about 1 1/4 percent (July contract -26 ringgit per tonne), but it was not enough to push the July contract back above the 2,000-ringgit level. The strength of production, at a time when plantations in the most productive region of the country were shut down, suggests that 2019/20 ending stocks may top 3 million tonnes, which could continue to weigh on palm oil prices in the near term.