Good afternoon,
Markets, in general, have remained weak with soybean oil off almost 2.5% and the DJI off more than 300 points, however, Brent crude remains supported at $47.50 per barrel. See the updated chart of soybean oil, focused on the last 90 days. With the market testing support at 37.50 again, the next support level sits at 37 cents. An argument could be made for a technical pull back to 36 cents but would require improvements to soybean crop development in South America and a pull back in palm oil. Absent an improvement in palm and soybean fundamentals to support continued weakness, we see a range of 37 to 39 cents in soybean oil.
The question will be, what impact will this pull back in soybean oil futures today have on palm oil prices tonight. Hard to say with the trade expecting more palm inventory contraction expected.
Now for the market analysis sent this morning.
Market Highlights
- BMD February crude palm oil down 27 ringgit, 0.81%, to 3311.
- February RBD Palm Oil down $10 to $842.50.
- Macro markets are weaker to start the week with both crude and equities taking a short breather. Much of the discussion still revolves around short term Covid restrictions and longer term hope focusing on the various vaccines. It sure seems the equity markets are itching to climb higher to start the week.
- CBOT soybean oil opened higher overnight but tracked lower with palm as the night progressed. It appears that there is some resistance in the 38.50 to 39.00 range along the trendline. Support looks to be in the range of 37.50 to 38.00. Soybean oil is taking its cues from soybeans and palm oil.
CBOT January Soybean Oil 
Source of chart: Refinitiv
- ITS and AmSpec released Nov 1-30 exports down 16% at near 1.6mm MT. This is slightly lower than trade expectations of 10 to 15% off the Oct 1-31 numbers.
- The Malaysian government has confirmed its intent to reinstate the export tax on crude palm products following the expiration of the zero export tax program that expires on Dec 31. This will bring Indonesia’s palm products into a more competitive position. This could drive a rush to increase exports from Malaysia to beat this export tax change.
- A few bits of bearish news but really these are data points the trade largely expected. The BMD made a run at the 20 day moving average but stalled just short of the 3232 support line. During the afternoon, traders remained focused on the additional data points coming in the next week or so. Production will be estimated by the MPOA and SPPOMA in the next 24 to 48 hours and then the market estimates for MPOB will start rolling in. It will be interesting to see the range above and below 1.5mm MT for stocks.
- It would be hard to believe the market will see too much extreme volatility until we get a better view of exports for December. The last couple weeks has the BMD in a range from 3200 to 3400 ringgit. A stocks number sub 1.5 mm MT would likely take the market back to 3400 while a stocks number closer to unchanged at 1.56mm MT would elicit a test of 3200 and possibly help the market back to a 3000 to 3200 range. We will know here in the next 10 days.
BMD February Crude Palm Oil
Source of chart: Refinitiv