Bean Oil Continues Surge Higher
- The United Nations’ vegetable oils price index has risen 70% to nine year highs since last June.
- The increase in edible oil prices has been a significant factor in the UN’s broader food price index rising to its highest since 2014.
- Inventories are at ten year lows due to labor shortages at Asian palm plantations due to Covid, and bad weather in key sunflower, rapeseed and soybean areas.
- A steep recovery in edible oil demand due to restocking after COVID lockdowns has made the tight supply situation worse.
- The US administration has proposed a ‘Clean Energy Revolution’ that would increase biofuel demand from refiners.
- Soybean oil has jumped over 30% since January 1, while palm oil prices have risen 20% since February.
FBN’s Take On What It Means: Palm oil production in Asia is expected to increase starting in April, which should curb further sharp advances in the world edible oil market. However, users in the US are coming to the realization that the potential expansion in the renewable diesel industry could significantly tighten bean oil stocks in the future, which has led to increased current demand. With US soybean stocks projected to fall to 120 million bushels this year from 525 million last year, bean oil prices may stay strong for months longer.
China Demand Likely to Continue
- The USDA announced nearly 4 million metric tons of corn were sold to China last week.
- Sales came as high-level talks between China and the US began Thursday.
- Tom Vilsack, the US Agriculture Secretary, was scheduled to start discussions with his Chinese counterpart last night.
- Trade talks are expected to be scheduled in the near future, and public statements from the Biden Administration indicate that the Phase One Trade Agreement will remain.
- There is some concern that the recent increase in corn purchases could be window dressing before negotiations begin.
- A new analysis from Iowa State University shows China’s reported hog losses last year were larger than the official figures indicated.
- This could lead to larger demand for both corn and soybean meal as the herd recovery continues longer, perhaps into 2022.
FBN’s Take On What It Means: As long as the US is competitively priced, China will buy from us when they need to make big purchases of corn and soybeans. Record purchases from China are likely to result in tighter soy and corn stocks going forward and continue to support world prices.
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