Soybean oil and palm oil remain strong, but expected increases in production limit the gains

Yesterday, the CBOT soybean oil market surged then pulled back, but it still remained strong. Yesterday, the Malaysia palm oil market rose for the third consecutive trading day to nearly a three-week high; although it was supported by rising prices of competing vegetable oils, expectations of increased production limited the upside. With biofuel demand providing a boost, CBOT soybean oil continued to set new highs. Meanwhile, Indonesia’s B50 policy, combined with very strong El Niño expectations that may lead to palm oil production cuts, further fueled bullish momentum from both supply and demand, diluting the effect of Malaysia’s relatively weak fundamentals. Domestic and overseas fats and oils markets stayed strongly synchronized due to cost pressures and demand substitution. Domestic oil mills’ operating rates edged up, but supported by downstream demand replenishment, soybean oil inventories continued to fall. However, downstream traders were cautious about procurement, and before the May Day holiday the market did not stock up heavily. In the second quarter, large volumes of soybeans are expected to arrive domestically, and soybean oil supply is therefore expected to be relatively loose. Near-month shipment schedules saw limited palm oil purchasing; last week, domestic palm oil inventories edged down, but they were still at a relatively high level. Market demand remained lackluster, and it is expected that fats and oils prices will trade in a range in the near term. (Feed Industry Information Network)