Wednesday, September 12, 2012
Soybean Oil futures look to be a follower, with price movements depending mostly on the direction of Soybeans and Soybean Meal. However, any weakness in price activity from the leaders in the Bean complex may be accelerated in Bean Oil prices given the generally mixed fundamentals for the vegetable oil market.
Soybean Oil futures have been the laggard of the Soybean complex bull market, as global supplies of vegetable oil are not nearly as tight as those of Soybean Meal. In the U.S., Bean Oil inventories are tight, with the stocks/usage ratio at 9-year lows of 6.8%. However, Palm Oil supplies are ample, with the Malaysian Palm Oil Board reporting that Palm Oil stocks rose by 5.8% from July's totals to 2.12 million tons. This is the highest level of stocks since October 2011. Many traders are beginning to fear that U.S. Bean Oil exports will be hampered, as buyers turn to cheaper alternatives such as Palm, Rapeseed, and Sunflower Oils for their vegetable oil needs. Some speculative traders have been adding to their net-long positions in Soybean Oil, with the most recent Commitment of Traders report showing large non-commercial traders increasing their net-long positions by 14,289 contracts as of September 4th. This was prior to the recent price correction and could be the catalyst for a significant sell-off in prices should long liquidation selling begin to accelerate.
Technical Notes
Looking at the daily chart for December Soybean Oil, we notice what appears to be a double-top formation, with the September 4th highs taking out the previous highs made back in April, but the market failed to hold at these lofty price levels. Prices are attempting to hold above the 20-day moving average, and this indicator looks to be acting as a support point for the December futures. The 14-day RSI has bumped-up against the 70 level, but has now turned lower and is currently reading a more neutral 52.68. Support is seen at the August 29th low of 55.67, with resistance found at the recent high of 58.60.
Mike Zarembski, Senior Commodity Analyst