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Market participants described another subdued session across the fats and oils complex, with many opting to stay on the sidelines despite a sharp rally in both soybean oil and heating oil futures. Several sources viewed the move as largely technical and unlikely to materially alter nearby cash markets, where liquidity remains limited.
“Not much going on today with soybean oil moving higher,” one participant said. “Everyone’s on the sidelines.”
Another added that while paper markets had strengthened significantly, most cash buyers remained reluctant to follow.
“Energy futures are on fire, but everybody believes it’s short-lived and will come back down,” one participant said.
That disconnect between futures and physical markets kept activity muted across much of the complex, with few day-to-day changes reported for animal fats and greases.
One notable exception was technical tallow, FOB Chicago, which was assessed 1 cent per lb lower at 76 cents per lb on Monday following a confirmed 15-railcar trade concluded late on Friday July 10, on an equivalent basis. Most other fat assessments were unchanged on the day.
Participants noted, however, that interest appeared stronger for deferred positions than nearby business, reflecting continued uncertainty over prompt demand.
“You could probably sell higher numbers for September,” one source said. “But sellers don’t really want to sell forward either. It’s a timing and liquidity standoff.”
Outside of fats, distiller’s corn oil (DCO) attracted the most attention as participants adjusted prices in response to the soybean oil rally. Distiller’s corn oil, fob Illinois/Wisconsin, cts/lb, 1 month forward and distiller’s corn oil, fob Illinois/Wisconsin, cts/lb, 2 month forward were both assessed at 76.50 cents per lb on Monday, up from 75.50 cents per lb and 76 cents per lb respectively on Friday.
Elsewhere, August and September DCO FOB Missouri River and FOB Nebraska/Kansas assessments also moved modestly higher, with ranges increasing by 1-2 cents per lb on the day.
Soybean oil provided the primary catalyst for the session. The most-active August Chicago Board of Trade soybean oil contract settled at 72.82 cents per lb, up by 3.35% from Friday’s close and marking its highest settlement so far this month. August NYMEX ultra-low sulfur diesel (ULSD) futures climbed by 7.86% to $3.8236 per gallon, further improving renewable fuel margins on paper by narrowing the soybean oil-heating oil (BOHO) spread.
Even so, participants said the stronger futures backdrop has yet to materially improve nearby demand, with most buyers remaining adequately covered through the summer.
On the supply side, domestic slaughter forecasts continued to recover from the holiday-related slowdown earlier this month. Based on USDA data, Fastmarkets’ research team estimated US cattle slaughter at 535,000 head for the week ending Saturday July 18, up by 1.13% from the previous week but still 5.73% below year-ago levels.
Year-to-date cattle slaughter through Saturday July 11 totaled an estimated 14.63 million head, down by 7.7% year on year, continuing to constrain the availability of animal-fat feedstocks despite modest seasonal improvements in weekly slaughter.
Meanwhile, hog slaughter is estimated at 2.35 million head for the week ending July 18, down by 0.8% week on week and broadly in line with year-ago levels. Year-to-date slaughter through July 11 totaled approximately 67.58 million head, just 0.37% below the same period last year.
Looking ahead, both cattle and hog slaughter are expected to increase modestly through late August, with cattle slaughter projected near 550,000 head and hog slaughter around 2.45 million head by August 22. Even so, participants said tighter domestic feedstock availability continues to support longer-term fundamentals despite the current lull in trading activity.
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