Bullish U.S. Acreage Data Drives Soybean Oil Higher

Vegetable oil prices were mixed on Tuesday as weakness in crude oil prices weighed on palm oil, but bullish data from the United States Department of Agriculture (USDA) drove soybean oil prices higher. The smaller-than-expected increase in U.S. soybean acreage triggered buying across the soybean complex. However, meal/oil spreading limited the advance in soybean oil.

Soybean oil futures rose about 1 1/4 percent (August contract +36 basis points per pound) to settle at the highest level in a week. However, fund spreading left the most actively traded August contract to settle almost 1 1/2 percent below the high of the day. Despite the post-report selling, the August contract still managed to end the day above the psychologically important 28-cent level. Buying at the 10-day and 20-day moving average limited the decline from the high. The annual Acreage report may support further gains in soybean futures, which would support soybean oil prices. However, unless crude oil prices resume the recent rally, fund spreading will likely limit additional increases in soybean oil values.

Palm oil futures fell about two percent (September contract -44 ringgit per tonne) to extend the streak of lower closes to five days. The most actively traded September contract settled below the 2,300 ringgit level for the first time since June 15. The recent decline left palm oil futures lower for June despite a surge in palm oil exports. Cargo surveyor data suggested palm oil shipments for June rose a little less than 30 percent from May. The decrease in the month-over-month growth in exports combined with news that the Indian government may increase the import tariff on palm oil by more than $20 per tonne to weigh on prices. If the volume of Malaysian palm oil exports in July is not within five percent of the total in June, palm oil prices are likely to continue to move lower in the short term.