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What’s HOT
Palm oil is hot once again, rallying back to 3 month highs on renewed production concerns:
The rally in palm in combination with strength in energy markets, signs of growing demand, stronger domestic basis and an uncomfortably short spec position have spurred a 12% rally in soybean oil in one week’s time.
Side note: there are also reports Indonesia is imposing as much as 200% tariffs on Chinese imports in an effort to protect its textile industry. The thought is China may retaliate in some fashion, including swapping out Indonesian palm oil imports for alternatives like soybean oil - further contributing to bean oil’s rally.
The rally in futures has oilshare back above 40% for the first time since April:
Interesting to compare managed money’s record net short in oil with their overwhelmingly long position in meal.
There have only been two other weeks in history (since 2018) meal and oil have had such a wide difference in net positions - both of which were in May 2018.
Clearly a lot of shorts have likely been covered since the last CFTC release (as of 6/25), nonetheless the near-200,000 contract difference in net positions leaves plenty of room for fireworks in what should be a spectacular unwind.
After months of record-low domestic basis, bean oil is finding new demand, pulling both basis and futures higher:
Speaking of demand - April marked the second month in a row we have used more than one billion pounds of soybean oil in biomass-based diesel production:
April also marked the FIRST MONTH IN HISTORY we used more soybean oil in renewable diesel production than biodiesel:
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