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Market Trends | December 29, 2015

Market Trends Report | December 29, 2015 – 

oil futures

After the significant rally the last half of November and first week of December, soybean oil futures traded lower by about 2 cents the balance of December.  This was primarily due to the belief that the $1 bio-diesel tax credit will be a blender’s credit and not a producer’s credit.  As a blenders credit, bio-diesel stock can still be imported from other countries and not all the increase outlined in the RFS mandate has to be sourced domestically.  The holiday shortened trading weeks have provided some volatile trading, but overall the movement has been range bound between .2975 and .3100.  Looking ahead the market should continue to focus on the S. American crop.  Typically there is harvest pressure felt in the soybean oil futures in January/February as the South. American crop is harvested.  Below are a few factors that will continue to play a role in the market movement.

Soy Bean Oil

Bullish Factors:

  • There has been talk that soybean meal is being imported into the Southeastern US for Q1. During this time of year and assuming normal market conditions, the US should be a very cheap source of soybean meal and therefore should not be importing meal.  Soybeans are crushed for the meal which goes into various feed applications for animals.  Q1, after a very large harvest of soybeans, should be a time that crushers run hard producing lots of meal and oil.  Winter reduces the available feeding alternatives so meal demand is typically very high.  If there is a reduction in meal demand or meal demand is met by imports and crushers slow down, there will be a reduction in oil production. (supportive futures prices)
  • There has been flooding in Rio Grande do Sul (Southern Brazil) and Northern Argentina which may hurt the soybean production in these areas.

 

Bearish Factors:

  • Weather forecasts are calling for 2 to 4 inches of rain in Mato Grosso (one of the largest producing states in Brazil) which will greatly improve the dry growing conditions. This will likely prevent analysts from reducing their Brazilian production estimates.
  • The new Argentine President has reduced export taxes on soybeans by 5% which may lead to as much as 11 MM MT of additional exports.

 

Coconut -Typhoon Melor dropped 10 inches of rain on the central/northern portion of the Philippines. The amount of damage that has been done to the coconut industry has yet to be determined.

 

Disclaimer: Oasis Foods shares the information above to provide insight on the factors affecting the pricing of our products. It is intended to be used for informational purposes only and should not be interpreted as purchasing advice.