Soybean Oil Futures Rally, but Selling in Complex Limits Gains

Vegetable oil markets continued to move higher on Wednesday, but the gains were not evenly distributed. Strength in Chinese vegetable oil prices continues to drive both markets higher, but an increase in the outlook for rainfall during the second half of the forecast period triggered selling in the soy complex that limited the advance in soybean oil values. Crude oil prices moved lower for most of the overnight session, but erased most of the losses following U.S. inventory data before selling into the close to end the day down about 1/4 percent.

Soybean oil futures gained about 1/4 percent (December contract +7 basis points per pound) as the liquidation of long oil share positions contributed to the selling that erased overnight gains. However, prices rallied off the late morning lows to get back above unchanged. The moves left the benchmark December contract just below the psychologically critical 32-cent level, which it traded around for most of the afternoon. Selling at the upper Bollinger band also contributed to the relative weakness, but the short-term technical picture remains bullish.

Palm oil prices climbed about one percent (October contract +26 ringgit per tonne) for the third consecutive day. The advance left the benchmark October contract at a post-pandemic high, but selling at the upper Bollinger band and the intraday high set on August 4 limited the advance. Beyond that high, there is likely to be little technical resistance until prices reach the life-of-contract high at 2,850 set on January 2. However, cargo surveyor data for the first 20 days of August may trigger some profit taking when the market reopens following a holiday on Thursday. In addition to the export data, Chinese prices will have the most influence on the market in the short term.