Oilseed outlook bearish ahead of USDA report

Market: Biofuels
10/09/14

Global oilseed and vegetable oil markets look increasingly bearish in the lead up to the latest world supply and demand report from the US Department of Agriculture (USDA), to be released tomorrow.

Market participants expect a large upward revision to US soybean yields, which were estimated in the USDA August report at 45.4 bushels/acre.

Since then, other agricultural consultancies have pegged this year's US soybean yield as significantly higher — weather has been favourable for the crop throughout the key pod-setting stage of the growth cycle. US based consultancy Lanworth recently estimated the soybean yield at 46.7 bu/acre, while US commodity trader FCStone pegged it at 47.6 bu/acre.

The expectation of a large bean harvest has seen prices trend lower through the summer and yesterday the benchmark November CBOT soybean contract closed beneath $10/bu, its lowest since 2010. The sell-off was triggered by an easing of concerns that an early frost might negatively affect yields of what is now set to be a record US soybean harvest.

With the harvest under way in some regions, there is little downside risk to the US crop and prices may continue to fall.

In other oilseed markets, Malaysian palm oil prices touched four-year lows in recent weeks, with crude palm oil (CPO) futures listed on Bursa Malaysia trading at their lowest since March 2009 on 2 September. The government reacted by scrapping export tax on CPO for September and October, in an attempt to reduce stocks and support prices.

The initial result has been positive. Data from cargo surveyor Intertek today showed Malaysian exports rose by 40pc to 487,955t in 1-10 September compared with exports of 347,094t during the same period in August.

But CPO prices on Bursa Malaysia fell today, as Malaysian Palm Oil Board data show that CPO stocks rose by 22pc to 2.1mn t in August compared with July, their highest since March 2013.

The country's production has been strong, while the delay of biodiesel blending mandates has meant domestic consumption is not as high as forecast.

A record rapeseed harvest has sent both seed and oil prices in Europe to four-year lows this summer.

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