President Donald Trump said he was “not looking for a partial deal” with Beijing, and the Chinese delegation canceled the farm tour, both of which triggered the concern for no breakthrough in bilateral trade talks last week among the markets. Market participants then lowered down their expectations for China to buy more US agricultural products, so oil futures rebounded to break losses for three sessions in row on the Dalian Commodity Exchange (DCE) on Monday. 

But that was only a flash in the pan. On Monday evening, Chinese importers were said to have bought 10 boatloads of soybeans for shipment from U.S. Pacific Northwest export terminals from October to December, or about 600,000 tonnes. In the meantime, US Treasury Secretary said Chinese Vice Premier would visit the US for trade talks next week, and he also said China’s trade delegation had not canceled the farm tour, but just delayed it at the request of US side, and they would reschedule it at a different time. Soybean oil thus opened lower to move down on the DCE on Tuesday, with Y2001 contract falling below the level of 6,000 yuan/tonne during the session. In addition, the price also fell due to the end of festival demand. Soybean oil inventory rose slight to 1.348 million tonnes from last week, and the import volume of palm oil also remains at a high level. Soybean oil market in China thus comes under pressure in the near term. 

The upbeat sentiment for the trade detente is bearish to domestic market, which is embodied in two aspects. On one hand, soybean supply will increase in China. Market participants said that Chinese crushers got another 1.61 million tonnes of US soybeans exempted from additional tariffs, and some insiders said that Chinese importers on Monday evening bought at least 10 boatloads of soybeans for shipment from U.S. Pacific Northwest export terminals from October to December, or about 600,000 tonnes. Soybean imports will likely increase as expected once there is any progress in bilateral trade talks next week. On the other, premiums of South American soybeans are falling with the restart of trade talks, for which Brazilian soybeans have declined by nearly 18% from CNF+245X (X=Nov) to CNF+201X for shipment in October. With lower soybean import cost, soybean oil will also have weaker cost support. 

The festival demand has wrapped up, except some small replenishment for bulk oils. Soybean oil has stocked higher to 1.348 million tonnes at present, and meanwhile, the imports of palm olein are predicted to be 550,000 tonnes and 500,000 tonnes in October and November, respectively. Therefore, domestic oil market will be in adequate supply. 

The aforementioned factors, including upbeat sentiment for the trade detente and lower import cost under falling premiums of South American soybeans, cracked down soybean oil on the DCE to fall below the pass of 6,000 yuan/tonne. In the meantime, oil inventories are expected to grow with lower demand by the end of festival demand, and US farmers are about to harvest and market their soybeans. All of these will continue to keep domestic oil market under check. Overall, soybean oil spot price is predicted to follow futures to fluctuate and stay relatively weak, but its declines may be subdued as most mills in Shandong and North China have made plans for downtime for the National Day holiday and the parade.