Indian demand pulls Argentina soyoil to 2-week high on palm scare

5 Apr 2019 | Rei Geyssens

A rally in palm oil prices has rekindled demand for soyoil and driven prices to a two-week high as Indian importers look to switch to cheaper vegoil supplies, market sources have told Agricensus Friday.

Malaysian palm oil futures strengthened to their highest level in six weeks on Thursday, with price gains continuing into Friday as survey data showed a strong March export programme had sent palm oil stocks to a four-month low; down nearly 6% on the month.

“Palm was too much undervalued,” a Europe-based broker said, with palm futures adding another 0.8% Friday to close the week 6% higher at MYR2,221/mt ($544.2/mt).

The jump in palm oil prices scared Indian vegoil importers, who turned their attention to Argentinian soyoil.

Soyoil trades on a CIF India basis were heard at $680/mt on Thursday, up $25/mt from the start of this week, with offers heard around $685/mt.

On the Argentinian side, physical premiums for May loading moved from a 90 point discount to the May Chicago futures on Monday to 40 points under on Thursday, boosting outright prices to $632.75/mt FOB Up River, its highest level in two weeks.

“There is more demand and not much oil left,” an Argentina-based broker said, after local crushers slowed operations on weakening crush margins.

“(Premiums) still look very aggressive... demand is very good in India for bean oil and you can expect new numbers today,” an India-based broker said on Friday.

Flat prices were further supported by a rebound in the underlying futures on the Chicago Board of Trade as the prospect of closing a US-China trade deal raised the possibility of increased US exports to China.

A recent strengthening in the Indian rupee has also allowed importers to pick up purchases faster, while the prospects of a weak monsoon might see lower domestic oilseed production, leaving the country more dependent on imports, an India-based source said.

The source added that the spread between refined palm oil and refined soyoil in the domestic Indian market has narrowed to $90/mt from $140/mt two weeks ago, meaning that soyoil is relatively cheaply priced compared to palm oil and primed for a price rise.

India imports roughly 15 million mt of vegoils a year, with palm oil contributing half that volume, one third soyoil and the balance split between sunoil and rapeseed oil.

Black Sea reacts

Thursday’s activity on the Argentine soyoil market spilled over in the Black Sea sunoil market on Friday, with May loading cargoes hitting a two-week high of $658/mt FOB Chornomorsk.

“With soyoil on CBOT and crude palm oil in Malaysia skyrocketing, I was expecting it,” the Europe-based broker said.

The Black Sea market has been struggling to attract fresh overseas buying interest for sunoil, as palm oil and soyoil prices have been hovering near a three-month low, making sunoil less attractive to Indian importers compared to other vegoils.

The last trade heard on a CIF India basis was at $702.5/mt earlier this week before the rally, its lowest level since mid-January.