If soyoil futures were human, they would be the type that – usually – needs a large alarm clock to get up in the mornings.
Their 9% rally from a March 2 low has defied a tendency to trade lower before the sun comes up in Chicago, including on the previous three trading days this week.
But on Thursday, they broke with recent tradition and leapt out of bed, adding 1.6% to 33.20 cents a pound for May delivery, as of 09:30 UK time (04:30 Chicago time).
Earlier, the lot touched 33.24 cents a pound, the highest for a spot contract in eight months. And this despite the industry data on Tuesday which showed US inventories at 1.79bn pounds, far higher than had been expected.
‘Trade is on edge’
It helps that rival vegetable oil palm oil has been performing well, and itself stood 1.4% higher in Kuala Lumpur at 2,649 ringgit a tonne, lifted largely by continued concerns over Indonesian and Malaysian production prospects, after drought blamed on El Nino.
Indeed, palm oil has outperformed, in that its price, compared with soyoil, is “at the high end of the its 15-month trading range, suggesting that soyoil is cheap versus palm”, said Richard Feltes at Chicago broker RJ O’Brien.
But it isn’t just dryness in the south east of Asia which is helping the vegetable oils complex, but concerns over rain prospects in another part of the continent too –India, where weak rainfall could threaten another poor oilseeds harvest.
(The country’s soybean output in 2015 fell for a third successive year, to 8.0m tonnes, from 12.2m tonnes in 2012,)
“The trade is on edge about the upcoming monsoon in India,” Mr Feltes said, with the longer-than-expected El Nino phase presenting some threat to prospects for the country’s crucial rainy season, which is only some three months away.
‘Better India imports’
Already, Indian vegetable oil imports have been on a winning spree, adding 15% in January.
“Soyoil has been rallying with counterpart palm oil, which has been gaining on lower production outlook and better India imports,” broker Benson Quinn Commodities said.
And India is the world’s largest vegetable oils importer, with purchases estimated by the US Department of Agriculture at 15.4m tonnes in 2105-16, compared with 9.7m tonnes for the second-ranked European Union.
Soyoil vs soymeal
And however the flat price for soyoil pans out, it looks set to gain in terms of the proportion of value of the soybean crush (as compared with that taken by soymeal) from current levels of about 38%, Mr Feltes said.
“Look for further gains” in soyoil’s share of crushing value “into the spring”, he said, flagging a “backdrop of shrinking global edible oil stocks and Indian dependency on a favourable 2016 monsoon”, besides growing US soymeal inventories.
In the past, soyoil’s share of value has topped 49% (in September 1990 and December 1994), although the most recent notable high, in November 2011, topped out at 45.6%.
‘Biggest supportive factor’
In fact, the forecast already looked to be coming true, with soymeal futures themselves, while higher too in early deals, up by a more modest 0.3% to $268.60 a short ton for May delivery.
Whatever, the upward direction of values of the soy processing products boded well for values of soybeans too, which gained 0.6% for May to hit $8.99 Ѕ a bushel, and earlier indeed touched $9.00 a bushel for the first time in two months, on a spot contract basis.
The “biggest supportive factor for soybeans”, at least in the last session, “was the rally in soyoil”, Benson Quinn Commodities said.
‘Easing flood concerns’
And at this time of year, with northern hemisphere spring sowings rising up the agenda, and soybeans and corn big competitors in plantings programmes, rises in the oilseed tend to reflect on prices of the grain too, and vice versa.
Corn futures for May gained 0.4% to $3.69 ѕ a bushel, amid some continuing positive comment too on US ethanol production data on Wednesday (which appeared to have little influence at the time on prices).
The data – showing ethanol production up 21,000 barrels per day last week to 999,000 barrels per day, while inventories fell – were flagged as “supportive for corn futures” by Terry Reilly at broker Futures International.
Still, on the negative side he flagged that corn futures had been felling pressure from “favourable” South American weather, and “easing flood concerns across the US Delta”, where excessive rain has hampered early sowings.
‘Weather worries linger’
For wheat, however, concerns over dryness and cold in the US Plains, big winter wheat country, remain alive.
“Forecasts remain less than favourable for the southern Plains, with temperatures in the low 20s Fahrenheit expected over the weekend, and limited rain for the west Kansas/Panhandle region through the end of the month,” said Benson Quinn Commodities.
“Weather worries linger for the US hard red winter wheat crop,” said Tobin Gorey at Commonwealth Bank of Australia.
“Weather forecasters now expect this dryish period to continue so it is beginning to stretch the definition of temporary.”
Soft red winter wheat futures for May rose bounced 0.6% to $4.73 Ѕ a bushel in Chicago, rebounding off the 50-day moving average at which they closed in the last session.
Kansas City-traded hard red winter wheat for May was 0.5% higher at $4.86 a bushel finding support again at its 100-day moving average.
Still, performance later by futures may depend on export sales data expected to come in at 250,000-400,000 tonnes for old crop wheat, compared to 330,618 tonnes last time, and 50,000-100,000 tonnes for 2016-17, compared with 102,860 tonnes.
For corn, another strong week of sales is expected for 2015-16 is expected, at 700,000-1.1m tonnes, albeit not quite reaching the 1.17m tonnes recorded last time. For next season, sales of 150,000 tonnes at best are forecast.
For soybeans, export sales for 2015-16 are expected at 400,000-700,000 tonnes, and new crop at 25,000-75,000 tonnes.
Last week, the figures were 475,180 tonnes and 3,302 tonnes respectively.
‘Sales may be off’
Export sales data will be closely watched for cotton too, with expectations of a decent figure.
“An analysis of pertinent data suggests that net sales against the current marketing year are likely to be relatively strong, and above the weekly pace required to meet the USDA’s export target” for the full season, said Louis Rose at the Rose Report.
“However, sales may be off” compared with the 200,000 running bales reported for the previous week.
Cotton futures for May stood up 0.4% at 58.55 cents a pound in New York, feeling some residual support too from a Cotton Association of India estimated that India’s 2015-16 production fell more than expected, to 34.5m bales, from 38.3m bales last season.
(Source – http://www.agrimoney.com/marketreport/am-markets-soyoil-hits-8-month-top-lifting-soybeans-to-$9—3548.html)