Technically Speaking

Monthly Analysis: Vegetable Oils

Todd Hultman
By  Todd Hultman , DTN Lead Analyst
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Nearly two years ago, Malaysian palm oil prices hit a high of 3,218 ringgits per metric ton, but it has been all downhill since then with USDA expecting a 4% increase in palm oil production and ending stocks in 2018-19. (DTN ProphetX chart)

Malaysian Palm Oil: January Malaysian palm oil prices dropped 148 ringgits last week to 1,892 ringgits per metric ton, finishing just above the 2015 low of 1,863 ringgits. The presence of an El Nino weather pattern is considered unfavorable for palm oil production and according to Climate.gov, a weak El Nino is expected this winter. December 2016 was the most recent peak in palm oil prices due to production shortfall, but since then, prices have dropped sharply lower and are now threatening to trade at their lowest prices in over nine years while USDA expects a 4% increase in both palm oil production and palm oil ending stocks in 2018-19. Palm oil is the largest source of world vegetable oil.

Soybean Oil: The world's second largest source of vegetable oil is soybean oil, and last week the December contract fell 0.25 to 27.37 cents per pound, not far from its 2018 low of 27.13 cents. Last week's soybean crush report from the National Oilseed Processors Association showed another record high crush pace and said U.S. soybean oil stocks were up 23% in October from a year ago. Like palm oil, soybean oil prices have also been falling since December 2016 and are near their lowest level in 12 years. Friday's Commitment of Trader data showed commercials net long 16,431 contracts of soybean oil, a bullish hint that commercials are finding attractive value at these low prices.

Canola: The third vegetable oil, canola, is technically speaking the strongest of the three oils as it has maintained a relatively narrow, sideways trading range for nearly four years. Last week however, January canola fell C$5.50 to C$476.90 per metric ton, the lowest close for the most active contract in 2018. Prices are still above the 2016 low of $435.50, but are also likely feeling bearish influence from palm oil and soybean oil. From a long-term perspective, canola prices are trapped between C$435 and C$545.

Comments above are for educational purposes and are not meant to be specific trade recommendations. The buying and selling of livestock and livestock futures involve 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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