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Daily Review on Markets for Oilseeds and Oils in China--16/9/2019

Today (Sept. 16th), the market for oilseeds and oils in China is shown as follows:

Imported soybean: Imported soybean price is steady today, among which Russian soybean is unchanged from last Thursday at 3990 yuan/tonne, and Canada soybean is unchanged at 4930 yuan/tonne. The United States decided to make adjustments to the additional tariffs to be imposed on Chinese goods on Oct. 1, and China will exclude some agricultural products from the additional tariffs on U.S. goods and purchase a certain amount of U.S. farm produce. China has bought over 600,000 tonnes of US soybeans last Thursday. And China and US will make a negotiation in October. If the negotiation went well, an increase of US soybean imports would be bearish to China's market. However, an insufficient inventory of distributed soybean is supportive of China's market. The market is mixed and short-term prices likely maintain stable.

Cottonseed: Cottonseed prices today are partially lower 0.02-0.04 yuan/kg with most purchase activities suspending, when the new cottonseed is small in quantity and high in price. The down stream takes wait-and-see attitude and oil mills are not eager to purchase. However, the price decline pace is limited by the tight supply before the marketing of new cottonseed. The price is expected to fall a bit after the massive marketing. Buyers should stay on the sideline for now.


Summary: U.S. soybean surged last Friday night on the purchases made by China and the bullish USDA report. Oil futures rise broadly on the Dalian Commodity Exchange today as crude oil soared because Saudi Arabia shut down half its daily oil production after a series of drone strikes hit its oil processing facility. In the spot market, soybean oil increases by 40-70 yuan/tonne and palm oil by 80-110 yuan/tonne in tepid trading. The rebound of oils is mainly contributed to the stimulation of the surge in crude oil price. Soybean crush fell slightly by 0.7% to 1.80 mln tonnes last week as some mills in South China were bothered by swelling soybean meal inventory, so that soybean oil inventory also dropped by 0.1% to 1.3307 mln tonnes. The decline is not huge enough to pull the trend of oil market. However, China began to exempt some retaliatory tariffs and recover the purchases of a certain amount of U.S. farm products and bought at least 600,000 tonnes of U.S. soybeans last Thursday, after the United States postponed the deadline of additional tariffs on Chinese imports. This is bearish to domestic oil market. Moreover, palm oil arrivals will be huge in September and October, and domestic demand for packing oil restocking has also slowed down. Therefore, oil futures on the DCE continue to narrow gains near noon. The upcoming harvest and sales of U.S. soybeans, the resumption of U.S.-China trade talks, and the completion of restocking before the holiday will keep oil market under check in the middle term. Market participants are suggested to remain cautious about the rebound space of oil market and buyers had better not drive up price excessively. 

Soybean oil: GB Grade I soybean oil is mainly priced at 6,030-6,260 yuan/tonne in domestic coastal areas, up by 40-70 yuan/tonne. (Tianjin traders 6,030-6,040, Rizhao traders 6,080, Zhangjiagang traders 6,260, and Guangzhou traders 6,170). 

Palm oil: RBD palm olein is mainly priced at 4,850-4,990 yuan/tonne in coastal areas, up by 80-110 yuan/tonne. (Tianjin traders 4,870-4,880, up 80; Rizhao traders 4,990, up 110; Zhangjiagang traders 4,930, up 90; Guangzhou traders 4,850, up 90; and Xiamen not offered).

Imported rapeseed oil: Imported rapeseed oil steps down in price today, of which it settles down 10-20 yuan/tonne at 7,370-7,480 yuan/tonne in coastal areas. (Fujian 7,370, down 20; Guangdong not offered; and Guangxi 7,480, down 10). The demand for rapeseed oil is subdued by its enlarged price gap with soybean oil and palm oil. Besides, soybean crush remains at a relatively high level of 1.80 mln tonnes in recent two weeks, and palm oil arrivals will be huge in September and October. Meanwhile, the market has slowed down its demand with the end of restocking before the holidays. The aforementioned factors have brought pressure to bear on the rapeseed oil market. But its inventory declined by 1% weekly to 442,000 tonnes last week. And Saudi Arabia shut down half its daily oil production after a series of drone strikes hit its oil processing facility, so that oil futures are buoyed by the surge in crude oil prices. In a hybrid of the bear and the bull, short-term rapeseed oil market may narrowly fluctuate at the high level, and buyers can keep light stockpiles. 

Cottonseed oil: Cottonseed oil today stays stable with a decline of 50-100 yuan/tonne when the small-packing oil restocking is about to end; the consumption of cottonseed oil for blending is not a lot. However, the downside trend is slowed down as operation rate and inventory are both low in cottonseed oil mills, and spot soybean oil is up 40-70 yuan/tonne, and palm oil is up 80-110 yuan/tonne after today oils on DCE once rise in a wide range on the surge of crude oil, which is due to the news that Drone strikes attacked an oil processing facility at Abqaiq and the nearby Khurais oil field on Saturday, knocking out 50% of the kingdom’s oil output. Amid a lack of favorable factors for staple oils, the cottonseed oil price is likely to stay stable in downside trend, and have a higher risk of decline after the massive marketing. Buyers can take a hand-to-mouth strategy for now.

(USD $1=CNY 7.07)