Technically Speaking

Palm Oil Shows Signs of Support

Todd Hultman
By  Todd Hultman , DTN Lead Analyst
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Malaysian palm oil is near its lowest prices in 11 years where support should be getting close. Overall demand for world vegetable oil is expected to be up 4% in 2018-19 and so far prices are holding above their 2015 low. (DTN ProphetX chart)

July Malaysian Palm Oil: Malaysian palm oil futures represent the largest world crop used for vegetable oil, and the July contract fell 108 ringgits last week to a new contract low of 2,010, which is also near its lowest price in 11 years on a monthly chart. Even though USDA estimates palm oil production up 3% in 2018-19, world demand for vegetable oil is estimated up 4%, a good reason for prices to find support at these cheaper levels. Technically, it is impressive that the monthly stochastic shows signs of bottoming, and prices are holding above the 2015 low of 1,863 ringgits.

July Soybean Oil: Like palm oil, July soybean oil fell 0.49 cent last week to a new contract low of 27.35 cents per pound. The world's second largest source of vegetable oil currently has an image problem while the trade dispute with China is building U.S. soybean inventories to record levels. At the same time, there should be some supportive benefit from the world's healthy appetite for vegetable oil. The monthly chart for spot soybean oil looks similar to palm oil as prices are holding above the 2015 low of 25.38 cents, and the monthly stochastic indicator appears to be bottoming. In the case of soybean oil, prices are near their lowest level in 13 years.

July Canola: Canada's canola crop is the leading source in the category of world rapeseed oil, but ran into a demand problem when China blocked Canadian imports after the arrest of an executive from Huawei Technologies. The July contract dropped C$15.20 per ton last week to a new contract low of C$431.00, which is also the lowest spot close in four years. China's shunning of Canadian products has hurt canola prices and unlike the other two oils above, canola has not yet reached long-term support. The monthly stochastic is deeply oversold, but is not yet showing a slowing of downward momentum. The last long-term low where support could be expected was seen in 2014 at C$388.00.

Comments above are for educational purposes and are not meant to be specific trade recommendations. The buying and selling of commodities or commodity futures involves substantial risk and are not suitable for everyone.

Todd Hultman can be reached at Todd.Hultman@dtn.com

Follow him on Twitter @ToddHultman

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