Argentine Weather Concerns Drive Soybean Oil Higher

Vegetable oil prices were mixed on Tuesday as concerns about drier-than-normal conditions in Argentina drove a rally in the soybean oil market. Expectations that palm oil inventories rose in February weighed on the palm oil market. Weakness in vegetable oil prices on the Dalian exchange also triggered selling in palm oil futures.

The divergent moves drove the spread between May soybean oil and palm oil contracts up to nearly nine cents, a level providing substantial resistance over the last month. The spread between July contracts rose to almost 10.7 cents per pound, just below the record of 11.1 cents set on February 24. The continued strength in the spread remains counterintuitive given the relatively tight level of palm oil stocks compared with soybean oil. However, robust domestic soybean oil demand suggests soybean oil…