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Rumors abound for Soyoil despite fundamentally heavy markets


Don't usual like to comment on Mondays as markets typically difficult to measure; however, Friday sudden rally in Soyoil just before May exchange delivery notification was rather unusual especially with the large amount of registered Soyoil in delivery position on May13. Soyoil K/U spread still in a large carry or contango of -1.12 or $24/mt. The unconfirmed rumor came from Bloomberg that Biden administration would slap duties on UCO imports from China starting tomorrow May15 as part of a package of punitive duty on China that certainly took Soyoil shorts by surprise. What many, including Bloomberg, are not understanding is that crop oilseeds carbon intensity are not favored in the GREET model of calculating carbon intensity and with growing measurement trend of such from California to Germany. It is difficult for traditional oilseed crops and crushers to compete with the low carbon intensity of waste oils and Tallow. This is the reason why EPA is pushing CSA (Climate Smart Agriculture) but they are being increasingly ignored as farm lobby is very unhappy with this trend that will only add to their costs. As you can see there are still a lot of shorts in soyoil based on latest CFTC report and contango in Soyoil is a strong indication. Trade wars are seldom bullish for commodities as it reduces economic growth and forces changes in trade flows as well as substitution that can be permanent.



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