An oil price war sparked over the weekend has hurt vegetable oils and pressured other agricultural commodities around the world.
On Friday, Russia's government signaled it would not cut oil production in a bid to raise prices, sparking a price war with Saudi Arabia, which lowered its official selling price for crude grades.
This had an immediate impact on the main benchmarks – Brent and WTI – which fell between 20% and 30% immediately on Sunday.
Below is a summary of the impact on agricultural futures.
Asia
Palm oil futures are set to suffer the biggest one-day drop in two months, with almost 7% wiping out the price of palm oil on Bursa Malaysia.
The front-month contract was trading at MYR2,291/mt (US $ 543/mt) by press time, after recovering from hitting a low of MYR2,200/mt (US $ 521/mt) – the lowest since mid-October.
“CPO futures took a beating this morning after facing an incredibly helpless market roiled by falling oil prices and Covid-19. These twin impacts brought CPO futures to their knees, clearing 10%, or clearing 245 points, capping below MYR2,206/mt,” said a broker.
In China, most agricultural futures, ranging from soybeans to sugar, fell into the red on Monday.
Vegetable oils led the sell-off with palm oil at 5-6% on the curve, followed by soybean oil and rapeseed oil which fell 2-4%.
Rapeseed meal futures fell 3-5% overall, along with soybean meal contracts falling 1-2%, while other soft commodity futures such as white sugar and cotton fell 2-4%.
“Domestic [markets] were diving on all fronts today. The feeling is very bad… Oil has fallen a lot and all vegetable oils have reached stopping points. It’s terrifying,” said a hedge fund manager from China.
Europe
Canola prices in Europe fell more than 1% in morning trading following the biggest sell-off, reaching their lowest level since late October last year.
Dutch rapeseed oil prices were expected to open €16/mt lower on Monday morning from Friday's close, with April loading valued at €764/mt FOB DM – the lowest since August 2019 and drop of almost €200/mt since the beginning of the year.
US
Soybean futures were hammered overnight after crude oil, palm oil and stocks fell to a 20-month low.
The most liquid contract was valued at 27.53 c/lb (US $ 607/mt) at the time of publication.
However, while oils felt the biggest impact, the volatility of grains and oilseeds became milder.
Soybeans at the Chicago Board of Trade fell 1.7% to US $ 8.76/bu (US $ 322/mt), hitting a nearly six-week low, while soy flour fell just 1% to US $ 301/mt. st, to a 10-day low.
The benchmark corn contract fell 1.2% to US $ 3.71/bu (US $ 146/mt), while wheat contracts fell between 1.3-1.8%.
Source: Agricensus
