China's vegetable oils rally as stockpiles decline, supplies tighten


Malaysian palm oil futures snapped a three-day rally on Thursday evening, falling from a near two-month high reached in the previous session and tracking weaker rival oils.

KUALA LUMPUR: Chinese vegetable oils rallied on Monday afternoon, led by a surge in palm olein prices to their highest level in more than two years, as depleting stockpiles tightened supplies and lifted the market.

The surge in Chinese edible oils began last week - with soyoil, palm olein and rapeseed futures all hitting two-year highs. The January contract for palm olein on China's Dalian Commodity Exchange rose again on Monday by as much as 3.5 percent, touching 5,946 yuan ($878), its strongest since August 2014.

Dalian's January soybean oil contract and the most active January rapeseed oil contract traded near last week's two-year highs as well, with tighter U.S. soybean supplies contributing to and supporting the price surge.

"Port stocks of palm in China are low," said Kelvin Chow, an analyst with Rabobank in Singapore, putting them at 338,000 tonnes compared with a five-year average of 645,000 tonnes for the end-October period.

"The soy complex plays a part as well. Seeing that there is more crushing going on in the U.S., the market might be worried that there won't be enough soybeans to import from the U.S.," Chow said.

China typically buys soybeans to crush for animal feed to feed its livestock sector, producing soyoil as a byproduct. It imported 7.7 million tonnes of soybeans in August, slightly down by 1 percent from the previous month.

Imports of rapeseed oil have also declined following a period of negotiations over a trade dispute between China and top supplier Canada, said Tommy Xiao, an analyst at Shanghai JC Intelligence Co.

While last month the two settled the dispute and said they would start exploratory talks on a free trade pact, the long period of uncertainty has held up Canadian canola shipments.

"China is producing less, and the import situation is tight," said Xiao.

Xiao said the Chinese government's auction of rapeoil stocks last week was all sold out, and snow in Canada has pushed up ICE Canada prices of rapeseed, supporting domestic prices there.

The weaker Chinese currency - supportive of yuan-denominated vegetable oils - and investor sentiment also played a role in the price rally, say traders and analysts.

"It's also due to what large funds are doing in China," said a Chinese trader based in Singapore. "They have a wider view and, compared with other commodities, believe vegetable oils are relatively cheap."

($1 = 6.7700 Chinese yuan) - Reuters
Article type: metered
User Type: anonymous web
User Status:
Campaign ID: 1
Cxense type: free
User access status: 3
Join our Telegram channel to get our Evening Alerts and breaking news highlights

palm oil , palm olein , soi oil , china , dalian , stocks , price ,

   

Next In Business News

Palm oil retreats on profit taking
Pfizer boosts forecast for vaccine sales to US$33.5bil
McDonald's sales surge on BTS meal craze, new crispy chicken sandwich
Singapore central bank removes caps on dividend payments by local banks
Mercury bags RM450mil construction job in Johor Baru�
Glomac registers RM28.3mil profit in FY21
KLCI ekes out slight gains, Petronas stocks, Tenaga advance
AstraZeneca second dose doesn't raise risk of rare blood clots
Barclays pays out more than US$1bln to investors as profits rebound
LSH Capital posts 1H earnings jump ahead of LEAP listing

Stories You'll Enjoy


Vouchers