Weekly Commodity: Oil/Shortening

Oil/Shortening
The July soybean oil contract closed at $.3099 down 94 points for the week. The July soybeans closed down 56 1/2 cents at $11.03 while the July soybean meal closed at $375.60 down $31.80 per ton. Sharply lower palm oil prices and a break back below $50 per barrel in the crude oil market helped to keep pressure on the soybean oil. The soybean complex finished lower as improving weather forecasts drove a significant amount of profit taking throughout the week. Heavy losses in the soybean meal market drove unwinding of meal/oil spreads and oil’s share of product value was able to post modest gains for the week as a result. The flat price of soybean oil did not fare as well however as sinking palm oil, sharply lower canola seed futures and the Friday combo of a sharply higher U.S. dollar/sharply lower crude oil market (BREXIT) all conspired to keep pressure on the market. The U.S. soybean crop is currently rated at 73% good to excellent, down from 74% last week but still well above the five year average of 64%. The current rating number remains the second highest in the past thirty years for this point in the season. Soybean planting is 96% complete compared to the five year average of 93%.
Next Thursday’s USDA stocks and acreage report will be a critical one for the soybean complex. Average trade estimates are calling for soybean acreage to be up anywhere from 1.5 to 2.5 million acres from their March report. A number outside of that range could easily drive a sharp price reaction in the market.

 

The Argentine Agricultural Minister revised his soybean crop estimate slightly higher to 58.0 million metric tonnes. This is a significant improvement from some of the earlier doom and gloom numbers near 55.0 MMT after the flooding down there. The news helped to keep pressure on the soybean market late in the week. Palm oil prices hit 6 month lows this week and the futures market has lost almost 10% of its value so far during the month of June. Rising production after the El’ Nino weather event, poor exports after the Ramadan stocks build and a stronger Malaysian currency have all combined to push prices lower. The canola seed market has fallen sharply over the last ten days on liquidation tied to estimates for next weeks Statistics Canada report. The average estimate calls for a 4% increase in canola acreage to just over 20 million acres versus their April report. If this is the case and they can achieve trendline yields, their ending stocks situation will not be nearly as tight as is currently forecast.