Cargo Surveyor Data Lifts Palm Oil Despite Bearish MPOB Data

Vegetable oil prices were mixed on Wednesday, narrowing the spread between the May soybean oil and palm oil contracts by nearly 1 1/2 cents per pound. Cargo surveyor data helped support palm oil prices, despite bearish data from the Malaysian Palm Oil Board (MPOB), but selling across agricultural futures weighed on soybean oil prices. Despite the broad selling, oil/meal spreading by funds limited the decline of the soybean oil market.

Nearby soybean oil futures dropped by about 1 3/4 percent (March contract -83 basis points per pound), but declines in the back end of the curve were smaller (March 2022 contract -36 basis points). It was the largest daily drop in the benchmark since it fell more than 1 1/4 cents on January 15. Despite the fact the contract settled just 1/4 percent above the low of the day, bulls can point out that the contract bounced off the five-day exponential moving average and settled above Monday’s closing price. However, suppose traders believe South American production will be close to the United States Department of Agriculture’s (USDA’s) projections. In that case, additional weakness in the soybean market could continue to weigh on soybean oil prices.

Nearby palm oil futures rose more than 1 1/2 percent (April contract +57 ringgit per tonne), but gains in deferred contracts were smaller (December contract +5 ringgit). Bulls shook off generally bearish data from the Malaysian Palm Oil Board (MPOB) and focused on cargo surveyor data to push the benchmark contract above 3,600 ringgit. Selling above the upper Bollinger band limited the gains, but the benchmark contract still settled at its highest price since January 11. The cargo surveyor data indicated Malaysian palm oil shipments rose about 50 percent from the same period in January, assuaging concerns about slowing demand. Suppose the cargo surveyor data continues to indicate a substantial increase in shipments during the balance of February. In that case, traders are likely to ascribe the decline in January’s shipments to the export tax differential between Indonesia and Malaysia, rather than a developing slowdown in demand. As a result, traders will be even more focused than usual on the reports to guide their short-term outlook for prices.

Data from the MPOB was generally bearish. The MPOB estimated end-of-January stocks rose nearly five percent from December, above the 1.7 percent increase anticipated by analysts and well above The Jacobsen’s expectation of a six-percent drop. A larger-than-anticipated decline in exports, which fell below one million tonnes for the first time since February 2015, accounted for the bulk of the difference between expectations and the MPOB data. Larger-than-expected imports partially offset more robust domestic use and weaker production, contributing to the first increase in inventories since September.