Soybean Oil Waiting For A Stop Signal

Since October, domestic soybean oil prices have continued to fall, and the main contract of 1901 has dropped from 6,000 yuan/ton to 5,400 yuan/ton, a drop of 10%. The author believes that in the long run, the pattern of surplus supply of soybean oil will not change, and the price will be difficult to reverse. In the short term, the Sino-US trade talks are expected to further pressure soybean oil, and the price continues to be weak. The author believes that the follow-up should focus on whether the Sino-US new trade agreement can be officially landed, and whether the peak season of consumption can bring a wave of rebound to soybean oil.


The pressure on the oil market is relatively high


Although the US soybeans are short-disturbed by Sino-US trade talks, the long-term high-yield pressure will not change, and the current growth of soybeans in South America will be further increased in terms of the current good growth of Brazilian soybeans and the smooth planting of Argentine soybeans. In the long run, the US soybean futures price is still facing a large downward pressure. In addition, crude oil prices fell from an early October high of 76.55 US dollars / barrel to 52 US dollars / barrel, a drop of 32%, directly affecting the consumption of biodiesel, which dragged down the global oil prices.


Soybean arrival in Hong Kong is expected to decline


Judging from the current supply structure, the import of soybeans from oil plants in major coastal areas of China is 6.66 million tons, which is significantly higher than the 4.19 million tons in the same period last year. According to the data of the granary in the world, from December this year to February next year, the imported soybeans are estimated to be 6.2 million tons, 5 million tons and 3 million tons respectively, but it is expected that the arrival of Hong Kong will continue to increase.


If China cancels the US soybean import tariff, the market will quickly turn into the US soybean with lower purchasing cost; if the Sino-US trade talks are slow, due to the fastest seeding speed and suitable growing season in this year, the new season Brazil early soybeans are expected In early next year, China will supply China; although the absolute amount of soybeans in China's national reserves is not large, it is enough for the small oil plants in Northeast China to start up for about one month, and if there is a supply gap in the later stage, some soybeans will still be ready for storage. To complement the domestic market.


In short, even if the US soybean import tariffs cannot be cancelled during the Sino-US trade negotiations, the actual domestic soybean supply gap will be significantly lower than the previous market expectations. The supply gap is most likely to occur in February next year, but Brazilian soybeans are likely Minimize the impact of this gap. In addition, if the Sino-US trade peace talks progress smoothly, it does not rule out the possibility that reserves and individual large enterprises are allowed to import US soybeans in advance to reduce tariffs to make up for the domestic soybean supply gap.


End-user consumption continues to be sluggish


Affected by the decrease in the amount of imported soybeans and the expansion of some oil mills, the operating rate of oil mills has declined. Although this led to a slight decrease in soybean oil stocks, the stocks still reached 1.8 million tons, continuing to be at historically high levels. Correspondingly, the number of soyoil warehouse receipts is also at a historical high. The pattern of oversupply of soybean oil is difficult to change in the short term. Even if factors such as the Sino-US trade talks or the start of the consumption season start to drive up prices, it is more likely to rebound rather than reverse.


At the same time, the consumption of soybean oil has rapidly shrunk since the end of the Mid-Autumn Festival and National Day, and the enthusiasm of dealers and end-users has continued to slump. Recently, along with the continuous decline in domestic and international oil prices, and the “positive” expectations of Sino-US trade talks, the mid-stream and downstream cargoes are more cautious, and the weekly volume of soybean oil has further declined, which is also caused by the decline in the operating rate of soybean oil stocks. The direct reason for the slow decline in inventory is still slow. However, with the arrival of the cold season and the approach of New Year's Day and the Spring Festival, soybean oil has gradually entered the seasonal consumption season. When the middle and lower reaches of the year-end reserve cycle, soybean oil prices are expected to usher in a wave of rebound.


On the whole, the fundamentals of soybean oil are still weak, and short-term consumption continues to be sluggish. The biggest suppression factor is the historical high level of inventory. Soybean oil prices will continue to weaken before the stocks have been substantially improved. However, with the end of the year near the boom in consumption and the preparation of the mid-stream and downstream for the New Year's Day and the Spring Festival, it is expected that the soybean oil will usher in a round of rebound. In operation, the short-term can try to make more soybean oil 1905 contract at 5400~5500 yuan/ton. If the price breaks down on the short-term platform, wait for the stop-down signal to continue to try.


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