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Why there are fears of vegetable oils shortages

Palm Oil was lower last week. There are fears of global shortages of vegetable oils now. Demand has been less so far this month and the market fears the loss of Indian demand due to the big Coronavirus outbreak in India that could cut demand. However, prices are very high in India, and imports are needed. Ideas of tight supplies are still around but supplies are expected to increase in the short term.

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Wheat: Winter Wheat markets were higher in all three markets as the weather forecasts turned drier in the northern Great Plains. Spring Wheat areas of the US and Canada should be hot and dry for the next several days, but then some showers are possible in the region, but mostly in Canada. Showers and rains were seen in parts of Western Texas and in Oklahoma. More showers are in the forecast in western Texas. Some rains would be very beneficial for planting and initial growth of the Spring Wheat while the drier but still wet weather would help Winter Wheat crops. Demand remains disappointing but the production might not be there for better demand in the coming year. Corn prices are high so demand for feed wheat could increase. 

Weekly Chicago Soft Red Winter Wheat Futures 

Weekly Chicago Hard Red Winter Wheat Futures

Weekly Minneapolis Hard Red Spring Wheat Futures

Corn: Corn and Oats closed higher as forecasts for the Midwest changed for the second time last week.  Hot and dry weather is forecast for the Great Plains and Midwest this week and hot and dry conditions continue in central and northern Brazil.  Some showers are now in the forecast for the Midwest in the second week. Longer range forecasts released by NWS call for warmer and drier weather for many important US growing areas this Summer. There are problems with the production potential for the Safrinha crop in Brazil as growing areas have been warm and dry and look to stay that way longer term.  Reports indicate that crops are being stressed due to the lack of rain. It is drier in central and parts of northern Brazil, but southern Safrinha areas got some timely and somewhat beneficial precipitation last week. 

Weekly Corn Futures:                                                                          

Weekly Oats Futures

Soybeans and Soybean Meal: Soybeans and the products were higher on Friday and Soybeans and Soybean Oil were higher for the week. Soybean Meal closed near unchanged for the week. Forecasts for hot and dry weather this week in the Midwest and Great Plains but showers are in the forecast for later this week. China should start with new US Soybeans purchases soon for Fall delivery and reports indicate they are now asking for offers. The longer-range forecasts from NWS call for warmer and drier than normal conditions for most Soybeans areas of the US.  There is still crush demand and a little export demand even though the demand is less now than before.  The US does not have a lot of Soybeans in the country anymore as most producers have already sold.  Buyers are scrambling for what is left.  Brazil is rapidly exporting Soybeans. 

Weekly Chicago Soybeans Futures:

Weekly Chicago Soybean Meal Futures

Rice: Rice prices were little changed in slow trading last week. Moderate precipitation and warmer temperatures are forecast for US growing areas. Rice areas have generally been wet and northern areas have been cool. Louisiana and parts of Texas are saturated. Warm temperatures are finally spreading north into Arkansas and Missouri and the crop progress is improving. Texas and Louisiana are almost out of Rice, but there is Rice available in the other states, especially Arkansas. Milling interest in Rice is said to be slow.

Weekly Chicago Rice Futures

Palm Oil and Vegetable Oils: Palm Oil was lower last week. There are fears of global shortages of vegetable oils now.  Demand has been less so far this month and the market fears the loss of Indian demand due to the big Coronavirus outbreak in India that could cut demand. However, prices are very high in India, and imports are needed.  Ideas of tight supplies are still around but supplies are expected to increase in the short term.  Canola was in a trading range on forecasts for wetter weather in growing areas again some showers reported in growing areas last week.  Weakening demand ideas were negative for prices as were ideas that the Canadian Dollar is ready to move much higher. Demand is thought to be OK with crush margins favoring a lot of production of vegetable oils to feed the demand but less exports. The demand for biofuels is about to increase and is one reason to see much stronger Soybean Oil and Canola prices.

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Weekly Malaysian Palm Oil Futures:

Weekly Chicago Soybean Oil Futures

Weekly Canola Futures:

Cotton: Futures were higher Friday and for the week. Trends are still up on the daily charts. Cotton growing conditions have improved with rains reported in West Texas and the Delta. The forecasts for the Panhandle region of Texas are now turning dry again and it could turn hot.  It is drier in the Southeast production areas, but some rains are in the forecast for the coming week. Delta crop conditions are called good. Ideas are that Cotton demand can hold strong after a positive export sales report on Friday.

Weekly US Cotton Futures

Frozen Concentrated Orange Juice and Citrus: FCOJ closed higher once again last week and chart trends are still up.  The weather in Florida is good with isolated showers. The hurricane season is coming and a big storm could threaten trees and fruit.  An active season is anticipated but that does not mean a big and damaging storm is coming.  It does mean that the market will be on alert if one does show up. It is dry in Brazil and crop conditions are called good even with drier than normal soils.  Stress to trees could return if the dry weather continues as is in the forecast.  Mexican crop conditions in central and southern areas are called good with rains, but earlier dry weather might have hurt production.  It is dry in northern and western Mexican growing areas.  

Weekly FCOJ Futures

Coffee: New York closed a little lower for the week and London was higher after trading both sides of unchanged as the growing conditions around the world were mixed. The return of dry and hot weather to some of the Brazil growing area was the reason for the buying, but reports of beneficial rains in parts of southern Minas Gerais in the last week were noted.  More showers are in the forecast for these areas this week, but development has been delayed and the initial harvest progress has been slowed. London was lower as Vietnam got rains and Brazil Robusta areas stayed dry.  The daily and weekly charts show mixed trends now in both markets but both markets have cleared some important resistance areas on the weekly charts and remain above these areas. 

Most Brazil Coffee areas should stay dry for at least the next week although a few showers are possible in southern Minas Gerais again. It will be cool but not cold with most of the colder air coming in the second half of the week.  It is also the second year of the production cycle so production will be less, anyway. Production conditions elsewhere in Latin America are mixed with good conditions reported in northern South America and improved conditions reported in Central America.  Colombia is having trouble exporting Coffee right now due to protests inside the country.  Conditions are reported to be generally good in Asia and Africa. It’s turning a little dry in Southeast Asia including Vietnam, but a storm brought some beneficial precipitation in recent days. 

Weekly New York Arabica Coffee Futures

Weekly London Robusta Coffee Futures

Sugar: New York and London spent most of the week in a trading range on forecasts for better rains in southern Brazil production areas and a stronger US Dollar against overall dry conditions in Brazil and ideas of increasing demand for Sugarcane.  Demand for ethanol should be increasing and could divert the cane processing to production of the ethanol and away from Sugar.  There is plenty of White Sugar available in India for the market.  Southern growing areas of Brazil are getting some beneficial rains, with Parana and parts of Sao Paulo getting the best rains.  Production has been hurt due to dry weather earlier in the year.  The seasonal crush is off to a slow start and Sugar content of the cane is reduced in initial industry reports from the center-south of Brazil.  India is exporting Sugar and is reported to have a big cane crop this year.  Thailand is expecting improved production after drought-induced yield losses last year. Ethanol demand is returning to the market as more world economies open up after the pandemic. 

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Weekly New York World Raw Sugar Futures

Weekly London White Sugar Futures

Cocoa: New York and London closed lower in range trading on Friday and both markets were a little lower for the week. The daily charts show sideways or downtrends in both markets. The harvests are over in West Africa and ports there have been filled with Cocoa. The weather has been a little too dry for best production prospects for the next crop. European demand has been slow as the quarterly grind data showed a 3% decrease from a year ago in grindings. This has been caused by less demand created by the pandemic. Asian demand improved.  North American data showed improved demand. The supplies are there for any increased demand. 

Weekly New York Cocoa Futures

Weekly London Cocoa Futures

(Featured image by Kate via Unsplash)

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Jack Scoville is a futures market analyst specializing in grains, softs, rice, oilseeds, and tropical products such as coffee and sugar. In addition to writing daily market commentaries in both English and Spanish, he offers brokerage services to an international clientele of agricultural producers, processors, exporters, and other professional traders. He is regularly quoted by major wire services including Dow Jones, AP, and Reuters. His comments are sourced by newspapers around the world and on various radio and television programs.