Tight supply leads to wide fluctuation of oil or the main tone.

The first part is a summary of preface

From August to September, the market of oils and fats showed strong shock, weak trend and huge fluctuation, and the overall trend was relatively strong, among which palm oil and vegetable oil kept hitting new highs. If the rising prices of oils and fats in the first half of the year are mainly due to the strong demand for oils and fats outside the market, the tight domestic supply and demand and the strong macro-funds, then the strong price shock in July-September is mainly due to the domestic supply speculation and the boost of macro-funds. The impact of macro-game on the oil market reflects the financial and speculative properties of oil varieties, which really enlarges the marginal impact on the recent oil market, which is quite different from other varieties of agricultural products (000061, Guba) such as protein and many food price fluctuations.

After entering August, some industrial products were in short supply due to power and production restrictions, and prices continued to rise. Most oil plants in port areas were also affected by this factor, and the basis of oil and fat generally rose sharply, and the expectation of supply shortage continued to enlarge. On the whole, the global vegetable oil balance in 2001-22 was less tense than that in 2000-21, but it was still tight. In addition, the shortage of beans in oil plants at the beginning of the fourth quarter and the potential weak consumption of soybean meal will also keep the soybean oil basis high in the fourth quarter. Domestic vegetable oil stocks began to decline slowly, and vegetable oil is expected to become the most powerful variety after the fourth quarter after adding rapeseed to confirm a sharp reduction in production.

Part II Palm Oil

(1) International market

(1) The output of horse palm in September was less than expected again, or it went to the warehouse slightly.

In August, Malay exceeded expectations by accumulating 380,000 tons to 1.87 million tons, the highest level of inventory since June 20. However, this market has not been traded, and the negative Malay data has been offset by Indonesia’s high export tax. According to the multi-caliber data such as mpoa and uob in September, the output of Malay crude palm oil in September is likely to be flat or even slightly lower than that in August. At present, it is the end of the seasonal peak season for increasing production, and the superimposed labor problems limit the output growth rate, so the output in September is still low. Before the Mid-Autumn Festival in September, the market will introduce 32,000 workers to alleviate the picking efficiency, which will cause the disk to plummet. However, the expectation of increasing the introduction of workers is a long-term impact rather than a short-term impact. The introduction of workers may gradually restore Malay production after 2022, but it may be difficult to solve the current dilemma of increasing production.

On the export side, Indonesia lowered the special export tax from July to August, which made Malaysia lose its competitive advantage. As a result, Malaysia’s exports fell sharply in August, but after the pressure of Indonesia’s sales eased, the export tax was raised again, and Indonesia was reluctant to sell. The export market of Malaysia turned around again in September. At present, it is estimated that the export volume of Malay in September will reach more than 1.5 million tons. Due to the slow growth of output and the great increase in exports, the inventory of Malay in September may decrease slightly compared with that in August, so the trend of horse brown is strong again, accompanied by a strong resonance breakthrough.

After October, Malaysia will gradually enter the production reduction season, and the output will gradually peak and decline. On the demand side, India’s recent procurement has slowed down. In September, India once again lowered import taxes to curb its high domestic prices, but then raised the tax base, which made palm oil import profits worse than soybean oil import profits. As of the end of August, the port inventory of palm oil in India is still low, and there is still some room for replenishment in the short term. It is expected that the horse palm may fluctuate strongly in the future, and even if it is pushed back, the space for the plunge will not be too deep.

Figure 1: Monthly output of Malay palm oil (unit: 1,000 tons)

Source: galaxy futures Agricultural Products Division, MPOB.

Figure 2: Monthly export volume of Malay palm oil (unit: 1,000 tons)

Source: galaxy futures Agricultural Products Division, MPOB.

Figure 3: Monthly inventory of Malay palm oil (unit: 1,000 tons)

Source: galaxy futures Agricultural Products Division, MPOB.

Figure 4: India vegetable oil import tax (unit:%)

Source: galaxy futures Agricultural Products Division, SEA.

(2) Indonesia’s price after tax increase is obvious, and the current pressure is not yet available.

Due to the large accumulation of palm oil stocks in Indonesia in June, in July, the Indonesian government announced that it would reduce the export levy, and the total export tax was 291 US dollars/ton. After August, Indonesia continued to reduce the export tax, so that the total export tax continued to drop from the highest of $348/ton in June to $268/ton. Due to the sharp reduction of export tax, Indonesia’s export volume increased greatly from July to August, and Indonesia’s willingness to sell goods was strong. We subjectively estimate that the accumulation of palm oil stocks in Indonesia from July to August is limited.

After entering September, with the easing of inventory pressure, the government once again announced that it would raise the total export tax to US$ 341/ton, returning to the high level in January-June 2021. Therefore, Indonesia showed a strong price-holding sentiment, and the price difference with Malaysia also widened significantly. Looking at the general direction, Indonesia’s inventory pressure may not be gradually reflected until the fourth quarter, and it is necessary to pay attention to the purchasing rhythm of India and China.

Figure 5: Monthly inventory of palm oil in Indonesia (unit: 1,000 tons)

Source: galaxy futures Agricultural Products Division, GAPKI.

Figure 6: Changes in export tax and levy of Indonesian crude palm oil (unit: USD/ton)

Source: galaxy futures Agricultural Products Division, GAPKI.

(2) Domestic market: the import profit continues to deteriorate, and the long-term procurement gap is significant.

Since July, the trend of domestic disk has been stronger than that of external disk, which is closely related to tight domestic supply, continuous loss-making import profits and persistent port inventory. In the third quarter, the domestic average monthly import of 24-degree palm oil was 400,000 tons, which was basically the same as that of the same period last year. In the third quarter, the monthly average demand was 380,000 tons, which was lower than the same period of last year and slightly lower than the situation in the second quarter, but the overall situation was relatively stable, affected by the need for food factories to purchase and the demand for raw wood in South China. By the end of September, the inventory of low brown ports continued to be less than 400,000 tons. This month, the profit of import arbitrage continued to deteriorate due to the impact of Indonesia’s considerable price. In November, the upside-down range of the shipping schedule was the highest profit in the same period in history, and it fell to -800 yuan/ton, which was so deep that it could only be compensated by the basis difference. By the end of September, the 24-degree spot basis in South China rose from 01+850 at the end of August to 01+1150, reflecting the tight supply expectation under the deep import loss.

According to the balance sheet, according to the current procurement progress, the gap is still obvious after October. Even if the demand weakens seasonally after October, it is difficult to accumulate domestic port inventory and continue to maintain a low level of 300,000-400,000 tons. Unilaterally, in addition to the tight domestic supply accompanied by a strong cash structure, the game funds also have a strong driving force. The labor problem in the producing area and the problem that the import profit is difficult to repair are all powerful short-term pushers of bulls. The overall trend of superimposed macro commodities is strong, and the recent palm oil holdings have increased significantly and speculation has increased.

Figure 7: Profit of palm oil import at 24 degrees (unit: RMB/ton)

Figure 8: Monthly import volume of domestic low brown rice (unit: ton)

Figure 9: Monthly domestic low-brown cargo volume (unit: ton)

Figure 10: Domestic 24-degree palm oil inventory (unit: ton)

Figure 11: P01 Positions (unit: hands)

Figure 12: South China spot basis of 24 degrees (unit: yuan/ton)

Source: galaxy futures Agricultural Products Division, Customs Data, wind.

The third part of soybean oil

(1) International market

(1) The short-term bearish trading of US soybean oil is coming to an end.

Since the beginning of the year, the trend of US soybean oil disk has been different from that of horse palm oil and domestic oil disk, and the consumption growth of US soybean oil and firewood is expected to be strong, mainly trading its own independent fundamentals. Throughout the third quarter, the trend of soybean oil in the United States was under pressure, and high prices suppressed demand. Among them, the total output of biodiesel increased less than expected due to the loss of production profit, the proportion of superimposed soybean oil decreased, and the consumption of raw wood from soybean oil decreased to less than 300 thousand tons per month. Food consumption in July-August is not as good as last year’s level, so the total domestic consumption of the two countries has dropped for three consecutive months since June. As a result, the US soybean oil inventory showed anti-seasonal growth in July and August, the ratio of stock to sales rebounded from the low level, and the inland basis of US soybean oil also dropped significantly.

In 2021, US soybean oil may be under pressure in the general direction due to less than expected demand. In the short term, the price/performance ratio of soybean oil may be highlighted again after a large price correction, and the decline is limited. By mid-September, after the adjustment of soybean oil price, the processing profit of soybean oil-based firewood increased from the highest loss of $1.2/gallon at the beginning of August to a loss of $0.7/gallon. Counting various subsidies and the price of RIN, the overall firewood production and blending profit improved rapidly, so the price of soybean oil in the United States may be supported at around 52 cents. In the medium and long term, after 22 years, with the gradual expansion of RD production capacity, the consumption of soybean oil and firewood in the United States is expected to increase by 1 million tons in the next year, and the long-term increase in soybean oil consumption will also stimulate the crushing of American beans in reverse. The potential increase of RD yield is also the basis of long cattle.

Figure 13: Profits from biodiesel processing in the United States (unit: USD/gallon)

Figure 14: D4-rins (unit: USD/gallon)

Figure 15: Monthly domestic consumption of US soybean oil (unit: ton)

Figure 16: Monthly Stock-to-Sale Ratio of US Soybean Oil (unit:%)

Source: galaxy futures Agricultural Products Division, USDA, Bloomberg.

(2) The discount in South America strengthened, and domestic consumption in Argentina recovered.

Last year, Argentina’s domestic consumption dropped significantly due to the double suppression of its own consumption of raw wood and the export of raw wood. At present, Argentina’s domestic consumption is still depressed after the firewood plan is lowered to B5, but the EU’s return to Argentina to purchase SME has restored the consumption of soybean oil firewood. In addition, the quantity of soybean oil purchased by India has increased recently, and the superposition of the two factors has strengthened the discount of soybean oil in South America. Due to the historical low water level of Parana River, the export transportation of Argentine oil meal was blocked, and the soybean crushing capacity in Argentina began to decline since June. It is expected that the average monthly crushing capacity will continue to drop to 3.5 million tons from August to September. With tight supply and good demand, Argentine soybean oil stocks continued to decline.

Compared with Argentina’s crushing, Brazil’s soybean crushing continued to maintain a high level year-on-year, Brazil’s oil meal exports were smooth, and Brazil’s raw wood production and consumption were relatively stable, which stimulated the steady growth of Brazil’s crushing volume. In the third quarter, Brazil consumed about 380,000 tons of soybean oil firewood every month. In the third quarter, Brazil implemented the B12 firewood plan, but the compulsory blending ratio will be lowered to B10 again in October-December. At that time, the consumption of soybean oil firewood may fall below 350,000 tons per month, and the soybean oil inventory in Brazil may increase slightly in the future.

Fig. 17: Monthly soybean crush in Argentina (unit: 1,000 tons)

Source: Agricultural Products Division of galaxy futures and Argentine Ministry of Agriculture.

Figure 18: Monthly consumption of soybean oil in Argentina (unit: 1,000 tons)

Source: Agricultural Products Division of galaxy futures and Argentine Ministry of Agriculture.

Fig. 19: Monthly Crushed Amount of Soybean in Brazil (unit: thousand tons)

Source: Agricultural Products Division of galaxy futures and Argentine Ministry of Agriculture.

Figure 20: Argentine soybean oil inventory (unit: ton)

Source: Agricultural Products Division of galaxy futures and Argentine Ministry of Agriculture.

(2) Domestic market: there is a large-scale shortage of beans in the country-power cuts and shutdowns, and soybean oil basis will remain strong for a long time in the future.

Looking back at the supply and demand of soybean oil in August, the crushing capacity of oil plants recovered to more than 1.9 million tons per week, and the supply of soybean oil was sufficient, but the apparent consumption of soybean oil increased significantly beyond market expectations, reaching more than 1.8 million tons, only lower than the level at the time of purchasing and storage in the same period last year. At present, it is considered that the high demand for watches is caused by the low terminal inventory from June to July and the continuous replenishment of stocks in the near future. In addition, feed oil has also contributed to the growth. After entering September, the focus of market transactions shifted to the expectation of soybean shortage in oil plants from September to October. Downstream enterprises were generally worried about the tight supply of soybeans and soybean oil, so they were more willing to replenish stocks. After mid-September, the phenomenon of power restriction and production restriction spread from industrial enterprises to oil plants, and the supply tension continued to increase. From late September to mid-October, power restriction in parts of East China, South China and North China led to a decline in operating rate, which can be said to add fuel to the fire against the background of soybean shortage. By the end of the month, the basis of one bean in East China and South China both rose above 01+900, and the basis of one bean in Tianjin and Rizhao also rose above 01+800, reflecting the expected tightening of supply. By the end of the month, the national stock of soybean oil was stable at a low level of 800,000 tons, the lowest level in the same period in history.

Assuming that the film impact weakens in late October, it will be difficult for the oil plant to return to a higher level under the expectation of bean shortage and weak demand for soybean meal. The fourth quarter is the traditional peak season for oil consumption, so soybean oil inventories may continue to decline slightly in the fourth quarter. In the medium and long term, even without the influence of limited electricity, the long-term fundamentals of soybean oil are optimistic, and the basis difference and monthly difference of soybean oil will also run strongly.

Figure 21: Domestic Soybean Crushing Quantity (unit: ton)

Source: galaxy futures Agricultural Products Division, My Agricultural Products.

Figure 22: Domestic soybean oil Zhou Du surface demand (unit: ton)

Source: galaxy futures Agricultural Products Division, My Agricultural Products.

Figure 23: Basis difference of one bean in Guangdong (unit: yuan/ton)

Source: galaxy futures Agricultural Products Division, My Agricultural Products.

Figure 24: Domestic soybean oil inventory (unit: 10,000 tons)

Source: galaxy futures Agricultural Products Division, My Agricultural Products.

Part IV Rapeseed Oil & Small Variety Oil

(1) International market: The output of rapeseed is lowered to 13 million tons, and the global oil balance sheet is still tight in 2012.

Statistics Canada once again lowered the forecast of rapeseed production in 21-22 to 13.2 million tons from more than 16 million tons predicted last month in its September report. Affected by extreme high temperature and drought, it is estimated that the yield of rapeseed will drop by more than 30% to 1.5 tons/hectare this year, and the output of rapeseed will drop by 5.8 million tons compared with last year. Combined with the decline of global rapeseed carry-over inventory, the total global rapeseed supply will drop by 6.5 million tons this year, which is equivalent to a drop of more than 2.5 million tons of global rapeseed oil supply. Most of the reduction of rapeseed will be reflected by the decline of international rapeseed trade, and some will be reflected by the decline of international vegetable oil trade. Subjectively, it is predicted that the rapeseed import in the EU will drop by 1.5 million tons to 4.8 million tons this year, the rapeseed import in China will drop by 800-1 million tons to 2 million tons, and the rapeseed import in the United Arab Emirates will also drop significantly.

The decline of international vegetable oil supply will be compensated by increasing the production of sunflower oil. Although Russia’s sunflower seed yield is slightly less than expected, due to the expansion of the total planting area of sunflower seeds in the Black Sea region, the international sunflower seed output has increased by more than 6.5 million tons compared with last year’s production reduction level, and the corresponding international sunflower oil output and export volume will also increase significantly. The market traded sunflower oil in advance to increase production. Since June, the international sunflower oil price has weakened significantly, but it has gradually increased compared with the recent bottom of the international vegetable oil price.

Based on the global demand for oil and the supply of soybean palm oil, it is estimated that the global supply and demand of vegetable oil will be less tense in 21-22 than in 20-21, but the ratio of stock to warehouse sales is still at a low level, which may mean that the international oil price is still difficult to weaken significantly this year.

Figure 25: International rapeseed production (unit: thousand tons)

Figure 26: International sunflower seed production (unit: thousand tons)

Figure 27: Global Vegetable Oil Supply and Demand Variables (unit: 10,000 tons)

Figure 28: International sunflower price difference (unit: USD/ton)

Source: galaxy futures Agricultural Products Division, Statistics Canada, USDA.

(2) Domestic market: the basis of vegetable oil has strengthened, and the supply shortage in the fourth quarter will gradually be reflected.

From July to August, the domestic demand for vegetable oil continued to be weak, and the price difference between vegetable oil and vegetable oil of other small varieties, such as corn oil, continued to shrink, and vegetable oil lost its cost performance. In addition, in the early stage, the inventory of inland vegetable oil in Sichuan and Chongqing was high, and the terminal enterprises mainly consumed and held the inventory, which reduced the apparent consumption of vegetable oil to a low of 200,000 tons in July and August. In the third quarter, the overall supply of rapeseed and vegetable oil was abundant, especially vegetable oil. In July and August, the average monthly import of domestic vegetable oil reached nearly 150,000 tons, which was significantly lower than that of 200,000 tons in the second quarter, but still higher than the same period of last year. The weak supply and demand in July and August also greatly weakened the basis of vegetable oil to the spot discount state. In 2021, the cumulative domestic import of vegetable oil is expected to reach 2.3 million tons, a big increase of 400,000 tons compared with last year. The weak supply and demand in the third quarter kept the vegetable oil inventory above 400,000 tons by the end of September, and the process of going to the warehouse was still slow in the short term.

After entering September, the market began to trade the expectation of "out of stock" in the fourth quarter in advance, and the mood of low-cost replenishment of terminal enterprises improved, which made the vegetable oil table need to rise to about 250,000 tons in September. In September, the forecast of rapeseed production was lowered again. The global rapeseed supply was tight in winning numbers, and the profit of domestic imported rapeseed maintained a deep loss, and there was still a big procurement gap in the long term. According to the forecast of the balance sheet, it is expected that the domestic vegetable oil inventory will drop significantly after November, and vegetable oil will enter a state of shortage after January next year. At present, the fund heat of vegetable oil is high, and the consistency of many views is strong, and the position has also risen to a higher level in the same period of last year. Generally speaking, vegetable oil may be the most resistant variety in the future, and the shortage of long-term spot will also support the monthly difference to maintain a positive set of ideas.

Figure 29: Domestic vegetable oil imports (unit: tons)

Source: galaxy futures Agricultural Products Division, My Agricultural Products.

Figure 30: Monthly consumption of domestic vegetable oil (unit: 10,000 tons)

Source: galaxy futures Agricultural Products Division, My Agricultural Products.

Figure 31: Domestic vegetable oil inventory (unit: 10,000 tons)

Source: galaxy futures Agricultural Products Division, My Agricultural Products.

Figure 32: Spot basis of Grade IV vegetable oil in East China (unit: RMB/ton)

Source: galaxy futures Agricultural Products Division, My Agricultural Products.

The fifth part of the market outlook

① spot end of the industry: the soybean oil supply end is tight due to the shortage of beans and the film restriction. Even after the fourth quarter, even if the power restriction factor is lifted, the supply growth will slow down due to the shortage of beans, and the domestic soybean oil basis will continue to be optimistic, and the monthly difference will be stronger. Domestic palm oil imports are seriously upside down, the origin is quite expensive, and there is also a procurement gap in the domestic long-term. It is urgent to give better import profits from the origin, and domestic stocks will remain low in the medium and long term. At present, the inventory of vegetable oil is high, and the demand is weak. However, after October, with the decline of arrival in Hong Kong and the overlapping procurement gap, the inventory will gradually decline, and the vegetable oil will easily rise after January.

② Data end of external disk: Malay output was less than expected in September, and the superimposed export was better, so it went to the warehouse in September against the season. In the fourth quarter, Malay will be slow and slow, or it will be difficult to form a significant negative. Indonesia’s market is tight, there is no inventory pressure, and we are concerned about the future procurement rhythm in India. Chicago’s short-lived bear has a long cow, and its recent consumption is less than expected, but it may be basically realized in the short term, and the space for a big drop is limited.

③ Game & Capital & Macro: At present, the three major oils and fats all have the problem of tight supply, which is difficult to alleviate in the short term, while the demand is stable at a high level, and there is no collapse of demand at a high price for the time being. In terms of funds, at present, the main forces of the three major oils are concentrated, and the bullish positions are obvious, paying attention to the disk callback caused by the main profit-making departure before the National Day. Macroscopically, under the goal of double carbon, the supply of some varieties is tight, and the goods are still in a bullish atmosphere.

Risk factors: Malay output; Buying goods in India; Start-up of domestic oil plants; Brazil planting weather, etc.

Part VI Trading Strategy

Unilateral strategy: the domestic supply of oil is tight and the inventory is low, which is difficult to alleviate in the short term. The macro-level of superposition is strong, and the general direction is strong. Pay attention to the support of p01 at 8000, y01 at 8800 and vegetable oil at 10500. However, near the holiday, the main force is too concentrated, so we should be alert to the potential callback caused by centralized liquidation before the holiday.

Arbitrage strategy: continue to hold the monthly difference between vegetable oil and soybean oil.

Option strategy: continue to pay attention to put options and seagull spread options. (The above views are for reference only, not as a basis for entering the market)

Galaxy futures Liu bowen