European veg oil prices slump

European veg oil markets slumped Wednesday, June 21, following CME futures and Asian markets lower after media reports circulated ahead of the US Environmental Protection Agency’s final decision on renewable volume obligations (RVOs), which looked to reduce the addition of rapeseed and soybean oils to the biodiesel mix.

Sunflower oil prices fell by an average of 4-4.5%, according to market sources, with prices for Sunoil FOB Six Ports in Europe and Black Sea sunflower oil falling by $35 per tonne and $60-80 per tonne on average.

Offers on a CIF Mersin basis fell to $820-840 per tonne from $900 per tonne CIF Tuesday.

At the same time, prices for Sunoil FOB Six Ports fell during the day to end at $925 per tonne against $900 per tonne FOB for loading in July, August and September.

Rapeseed oil was also quoted lower, with increased supply and prices falling by, on average, €30 per tonne per day to €910 per tonne against €890 per tonne FOB Rotterdam.

CME soybean oil futures hit limit down during the overnight session on the back of the leaked reports that the EPA had approved RFS requirements lower than the market expectations.

Industry reaction

“The amount of EV RIN abandoned has not been allocated to biomass biofuel mandates, nor has there been an increase in ethanol-based biofuels,” Anilkumar Bagani, head of research at Mumbai-based vegetable oil broker Sunvin Group told Fastmarkets Agriculture.

Others meanwhile suggested the market had become overheated after the EPA delayed its decision from last week to this weak, while concern about dry weather’s effect on US crops fuelled price rises.

“The Chicago bean oil futures bubble became too big and the announcement numbers were below expectation, resulting in the price decline,” Sergey Repetsky, managing partner of Sunstone Brokers SA said.

“The delay of the EPA decision and weather concerns had overheated the veg oil market,” he added, saying it remained to be seen whether the falls would be sustained.

“Whether the supply side is tight or not, we will see in the coming days, this price decline will push sellers to move volumes,” he said.

Some market participants believe the sharp selloff in soy oil futures will continue, while others believe selling through pressures should be less severe.

“Commercials believe soy oil futures will quickly trade below 50 c/lb,” Charles Sernatinger of Marex Capital told us, adding the leaked expectations for EPA’s RVO announcement discussed over the previous days were unrealistic.

On the other hand, Terry Reilly from Futures International said further price declines should be less intense.

“Looking at the September contract, the trade ran the market up late last week, only to give back a large amount of that gain today,” Reilly said.

He added that further downside is on the radar but not to the extent seen back in December when another leak in EPA’s RVO announcement pulled soy oil prices steeply lower for an extended period.

Some market participants meanwhile said the price cut was expected even without the EPA report.

“On the way up, prices were very nominal without liquidity and price moved overdoing it somehow,” said a trader based in Switzerland.

“Now with the external rally taking a break Six Port prices are losing a bit of the nominal premium built in recent days.”

“Further soy oil prices had a steep upside run recently, hoping the substantial increase in the EPA final rule and the prices rose above the competing feedstocks in the US Markets and now need to adjust lower to remain competitive,” Sunvin’s Bagani told Fastmarkets Agriculture.

Last week, Sunoil FOB Six Ports and the Black Sea sun oil prices skyrocketed by $60-90 per tonne on average over the week to $995 per tonne against the buyer’s idea of $930 per tonne FOB under pressure from higher CME futures.

The sharp backdrop in soy oil futures in Chicago also spilled over into South American cash markets.

At the time of publication, soy oil premiums had lifted only mildly in the region compared with the steep plunge in futures, with brokers saying the market was mostly halted with players digesting sharply lower benchmark prices.

For more information, take a look at our biofuels prices page.