Palm oil is short, strong and weak.

　　In the past two weeks, with the rising price of origin, Dalian palm oil main contract 2405 accelerated to above the 8000 yuan/ton mark, leading the rise of oil and fat disk. This month’s POC meeting expressed the bullish market, while the subsequent MPOB supply and demand report had a flat impact on the market. Judging from the supply and demand situation of palm oil producing areas in March, the lag of production recovery makes the inventory of palm oil producing areas still decline inertia, and Ramadan has a certain boost to the demand side. From the domestic point of view, the upside-down import profits limit the follow-up procurement, and the progress of domestic palm oil destocking may continue. Under the internal and external lido resonance, palm oil prices are driven by stages. However, with the recovery of production in the second quarter, the purchasing enthusiasm of India and China, the main importers, is weak, and it is expected that the loose market outlook will limit the room for palm oil to continue to rise.

　　MPOB’s supply and demand report was mediocre.

　　The monthly supply and demand data released by MPOB this month has little impact on the market, basically maintaining weak supply and demand, and the inventory continues to decline. Among them, Malaysian palm oil exports decreased by 24.75% in February, lower than expected; Inventory decreased by 5% from the previous month, lower than expected; Imports increased by 10.38% from the previous month, higher than expected; Output decreased by 10.18% month-on-month, which was lower than expected. High-frequency data of institutions in March showed that Malaysian palm oil production increased month-on-month, and the export side was still relatively weak. With the entry into Ramadan in mid-March, the expectation of insufficient labor supply will also bring disturbance to the supply side, while Indian procurement on the demand side is expected to form a boost. It is expected that before the end of Ramadan in mid-April, the inventory of the place of origin will hardly improve significantly, which will continue to support the price.

　　Domestic inventories continued to fall.

　　After the Spring Festival, the basis quotation of domestic oil plants rose, the import cost of palm oil continued to hit a 13-month high, and the poor import profit restricted domestic palm oil from buying ships. In the first and second quarters, the domestic palm oil arrival in Hong Kong dropped significantly. In terms of buying boats, according to Mysteel’s statistics, there were about 8 domestic commercial boats (including workers’ brown) in February, and about 4 in January. It is estimated that the arrival in Hong Kong in February will be less than 200,000 tons. Up to now, there are about 4 commercial ships bought in March (including industrial brown), and it spans about 2 April in March. It is expected to arrive in Hong Kong around 200,000 tons in March.

　　From the demand side, under the high spot price, the downstream trading situation has not improved significantly, mainly due to the need for edible oil. Under the pattern of weak supply and demand, the domestic palm oil inventory has been falling to a low level since the Spring Festival holiday. According to Mysteel’s research, as of March 8, 2024 (the 10th week), the commercial inventory of palm oil in key areas of China was 573,450 tons, a decrease of 44,700 tons from the previous week or 7.23%.

　　The fundamentals of competing products are loose.

　　Recently, the US soybean market has been cleared in stages, and the willingness to stack domestic oil plants is strong, and the soybean varieties have staged a rebound trend. However, for the market outlook, in the process of fully realizing the high yield of soybeans in South America, the selling pressure of Brazilian soybeans still limits the space for the premium to rise. From the perspective of American soybeans, the USDA report did not give directional guidance to the disk, and the global soybean supply was still treated loosely. American soybeans lacked continuous upward drive before the arrival of the new planting season, and the pressure at the 1200 cents/bushel mark was still obvious, which dragged down the inner disk soybean varieties from the cost side. Domestically, with the centralized listing of South American soybeans in the market, there is a huge supplementary expectation for domestic imported soybeans, and the supply of soybean oil will be relaxed again, leaving room for ceiling price.

　　Recent market judgment

　　For palm oil in the market outlook, we think it should be treated with short strength and long weakness. From the point of origin, Southeast Asia continued to go to the warehouse in February, and the arrival of Ramadan also further boosted the domestic consumption of palm oil. However, with the recovery of the production area in the second quarter, the phased high price will once again limit the purchasing enthusiasm of the demanding countries, and the fundamentals will shift to strong supply and weak demand, and then the palm oil price will be under pressure. From the domestic point of view, palm oil import profits upside down still limit the purchase of ships, and the progress of going to the warehouse will continue. Looking forward to the market outlook, we believe that the palm oil 2405 contract will still run above the line of 8000 yuan/ton in the short term, and there is an expectation that the spread between beans and palm will continue to shrink. (Author: Guoyuan Futures)