(April 8): Soybean oil fell the most in three weeks after a temporary ceasefire between the US and Iran pushed crude prices lower, denting the appeal of crop-based biofuels. Palm oil also declined.
Soy oil futures plunged by the daily exchange limit to 66.22 cents a pound, before paring losses. Almost all grain and oilseed futures in Chicago also retreated, while palm oil extended losses for a third day in Kuala Lumpur, dropping as much as 3.3%.
The two-week ceasefire in the Middle East was agreed less than two hours before President Donald Trump’s deadline for attacking Iranian power plants and bridges. Crude plunged below US$100 a barrel on hopes that the reopening of the Strait of Hormuz as part of the deal will restore energy flows — at least temporarily — out of the Persian Gulf to global markets.
If talks move towards a lasting resolution to the six-week conflict, vegetable oil markets are expected to shed their risk premium and return to underlying fundamentals, said Paramalingam Supramaniam, a director at brokerage Pelindung Bestari Sdn Bhd. The recent rally was driven largely by developments in the Middle East, he said.
For palm oil, production in Malaysia in April as well as export demand will be a key focus for the market, Paramalingam added.
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Wheat futures, meanwhile, dropped to their lowest since March 23 on hopes that supplies of farm inputs will increase as Hormuz opens up. However, while prices are likely to trend lower in the coming days, it’s only a matter of time until the market realises that the “damage has been done”, said Vitor Pistoia, a senior grains and oilseeds analyst at Rabobank.
“Diesel prices are up, and they are materially up for the rest of the season,” Pistoia said. “Nitrogen prices are massively up, and they will be for the remainder of the season, he added, so farmers “are carrying these high input costs regardless of a ceasefire.”
Brent crude fell as much as 16% while West Texas Intermediate tumbled the most in almost six years. Vegetable oils such as soy and palm are closely tied to movements in the crude price, as a large portion of their demand stems from biofuel production.
See also: Wheat moves higher on Iran ceasefire uncertainty, crop survey
Prices:
- Soybean oil fell 3.5% to 67.26 cents per pound as of 11.30am in Singapore
- Palm for June delivery on Bursa Malaysia Derivatives dropped as much as 3.3% to RM4,608/tonne; +14% YTD
- Wheat fell 2.8% to US$5.81 a bushel
- Corn was about 1% lower and soybeans were down 0.3%
Uploaded by Felyx Teoh
