Covid-19, oil price war hammers vegoils, pressures other ags
A crude oil price war triggered over the weekend has hammered vegoils and pressured other agricultural commodities globally.
On Friday Russia’s government signalled it would not cut crude production in a bid to prop up prices, in turn sparking a price war with Saudi Arabia, which slashed its official selling price for grades of crude.
That had an immediate impact on key crude benchmarks – Brent and WTI – which fell between 20% and 30% immediately on Sunday.
Below is a round-up of the impact on agricultural futures.
Asia
Palm oil futures are poised to suffer their biggest one day fall in two months, with almost 7% wiped off the price of crude palm oil on the Bursa Malaysia.
The front-month contract was trading at MYR2,291/mt ($543/mt) by time of press after recovering from hitting a low of MYR2,200/mt ($521/mt) – the lowest level since mid-October.
“CPO futures were slaughtered this morning after facing an incredibly powerless market roiled by oil price crash and Covid-19. These twin impacts brought CPO futures to its knees erasing 10%, or wiping off 245 points, to hit limit down MYR2,206/mt,” said one broker.
In China, the majority of agricultural futures ranging from the soybean complex to sugar, all plunged into the red on Monday.
Vegetable oils were leading the selloff with palm oil tanking 5-6% across the curve followed by soyoil and rapeseed oil both falling 2-4%.
Rapeseed meal futures plummeted 3-5% across the board along with soymeal contracts falling 1-2%, while other soft commodity futures such as white sugar and cotton all fell 2-4%.
“Domestic [markets] were plunging on all fronts today. The sentiment is very bad… Crude oil fell so much and vegetable oils all reached trade-stops. It is terrifying,” said one China-based hedge fund manager.
Europe
European rapeseed prices fell over 1% in morning trade following the wider selloff to hit 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 around €764/mt FOB DM – its lowest since August 2019 and down nearly €200/mt since the start of the year.
US
Soyoil futures took a hammering overnight, following crude oil, palm oil and equities lower to hit a 20-month low.
The most liquid contract was valued at 27.53 c/lb ($607/mt) by time of press.
Yet while oils felt the biggest hit, grains and oilseed volatility was more muted.
Soybeans on the Chicago Board of Trade were down 1.7% at $8.76/bu ($322/mt) to hit a near six-week low, while soymeal was down just 1% at $301/st, down to a 10-day low.
The benchmark corn contract was 1.2% down at $3.71/bu ($146/mt), while wheat contracts were down between 1.3-1.8%.