Soybean Oil Prices Fall on Profit-Taking in Soybean Futures

World vegetable oil prices were widely mixed on Monday as rising prices on the Dalian exchange contributed to palm oil gains while profit-taking across the soybean complex crushed soybean oil futures. Weakness in crude oil prices triggered short oil share spreading by funds, which weighed on soybean oil prices. West Texas Intermediate futures fell back below the psychologically critical $40 per barrel level on several developments that analysts expect to increase supply.

Soybean oil futures fell about 2 1/2 percent (December contract -85 basis points per pound). The decline nearly erased all of the gains posted on Friday and left the benchmark December contract back below the 34-cent level. Prices rallied overnight, but weakness in soybean futures that accelerated sharply at the U.S., opening left prices to settle near the day’s low. Suppose speculators, historically long in soybean futures ahead of the United States Department of Agriculture’s monthly report on Friday, continue to liquidate their position in soybean futures. In that case, soybean oil prices will likely continue lower. Still, world vegetable oil fundamentals remain bullish, and Chinese cash prices are near the highs set in mid-September, so there is only so far soybean oil prices can fall before the support from world fundamentals limit the decline.

Palm oil prices rose about 2 1/2 percent (December contract +83 ringgit per tonne). The rally left the benchmark December contract just below the psychologically critical 3,000-ringgit level. However, selling above that level limited the advance. The Malaysian Palm Oil Board (MPOB) reported slightly larger-than-expected palm oil inventories at the end of September, which could be bearish. However, expectations for falling production and historically tight stocks limit the downside price risk. The sharp rebound in Chinese vegetable oil futures on the Dalian exchange following the Golden Week holiday should also support prices. That said, if soybean oil prices continue to fall, palm oil prices could come under pressure in the short term.