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Agri, Why Rapeseed Oil Lead the Rise of Vegetable Oil?

February 10 2020 13:02:59     SunSirs (Daisy )

Consumer and consumption chain aspect, end consumers could directly consume vegetable oil, and would indirectly consume rapeseed meal through consumption of pigs, birds, aquatic products, etc., Therefore, 2019-nCoV would directly affect rapeseed oil and would indirectly affect the consumption of rapeseed meal. Rapeseed meal is a by-product of rapeseed oil, and the difference of new supply quantity between them mainly comes from the difference of import quantity.

The Performance of Rapeseed Series Future is Better than That of Bean

On the first day after the festival, i.e. last Monday, the opening price of the main rapeseed meal 2005 contract hit the lowest price of 2086 RMB / ton, and closed at 2163 RMB / ton, down 3.18%. 

The main rapeseed 2005 contract hit the lowest price of 7064 RMB / ton, and closed at 7108 RMB / ton, down 6.31%. On the next day, rapeseed meal filled the gap, while rapeseed oil filled the gap on Thursday after a continuous rebound. 

The varieties of rapeseed experienced a panic decline in opening, and then gradually rebounded to the level before the festival, and always stronger than the that of soybean.

Limited Supply Leveraged by 2019-nCoV

The shortage of rapeseed stock in China is due to its own reasons. As of February 2, 2020, the inventory of domestic imported rapeseed was only 129000 tons, compared with 505500 tons in the same period of the previous year. The extremely low inventory and the expectation of arrival in port result in the low start-up rate of oil plants. Import amount aspect, it is difficult to ease the friction between China and Canada in the short term, and rapeseed supply continues to be tight. Even if 2019-nCoV does not affect the start-up rate, the new supply of domestic rapeseed will be less.

The epidemic led to a slight increase in logistics and transportation costs. In the fight of epidemic prevention and control, a large amount of logistics forces has been invested in medical supplies and necessities for the masses. Therefore, the cost of logistics and transportation in other fields has increased. Logistics cost increase will be transmitted from upstream to downstream.

Oil pressing factories are not in the category of delayed resumption enterprises. Rapeseed pressing enterprises are mainly distributed in Fujian and Guangdong. According to the policy, non-essential enterprises shall not return to work as early as February 9, according to their own conditions. However, enterprises involved in ensuring urban operation, epidemic prevention and control, people's livelihood and other related enterprises involved in the vital national economy and people's livelihood need to stabilize production and provide good service. The essential categories of people's livelihood include supermarket, food production and supply industries. Obviously, oil seed crushing Belongs to this class. The resumption time of the oil plant has not been significantly affected.

It is Easy for Demand to Fluctuate Market

The market's prediction of oil consumption end mainly refers to the situation of SARS in 2003. However, what we need to notice is that in 2017, the structure of household consumption market has changed greatly. So, it is necessary to take a rational view of the possible changes of vegetable oil consumption. Vegetable oil consumption is expected to show a slight increase in small packaging and a significant decline in medium packaging in the first quarter, but the total amount decreased.

Sales of small package oil increased slightly. The impact of SARS epidemic on oil market in 2003 is reflected in small package oil. Due to the panic of the epidemic situation, the residents purchased in advance and guarded against price increase, which led to the sales volume of small packaging oil in a short term.

SARS broke out at the end of 2002 and entered the spreading period from March to April in 2003. The outbreak period was from the middle of April to the beginning of May in 2003. The residents' early purchase mainly focused on the early stage and the late stage of spreading. 

In 2020, the outbreak of 2019-nCoV occurred before the Spring Festival, and the inventory of residents' homes is more sufficient than that of other months. Important changes are reflected in the procurement approach. The convenience of online procurement weakens the strength of residents' preventive procurement (except for Hubei, which has a serious epidemic), and the increase of small packaging oil benefits from the growth of home consumption and the decline of outside-home consumption. 

The sales volume of medium packing oil is shrinking. The policies such as the postponement of resumption of work, the postponement of school opening, and the downturn of restaurant industry directly lead to the contraction of the consumption of middle packaging oil. 

In addition, because the per capita oil consumption in the outside home is much higher than that in the home, the reduction in the consumption of medium packaging is difficult to make up for the increase in the consumption of small packaging at home. According to the recovery of restaurant industry before and after the SARS epidemic, in the first quarter of 2020, the consumption of medium packaging oil is unavoidable, and it is expected to rise on a month on month basis in the second quarter.

Some Regions Plan to Increase Vegetable Oil Reserves

Data shows that as of February 2, vegetable oil inventory along the Yangtze River is 54000 tons, coastal land is 59000 tons, East China is 223000 tons, a total of 336000 tons, compared with 763000 tons in the same period in 2019. According to market news, provincial emergency reserve plans to increase vegetable oil reserves by about 80000 tons. Among them, there are 21000 tons in Sichuan, 42000 tons in Guizhou and 15000 tons in Yunnan. Sichuan is mainly stored in the form of packaging, while Guizhou is mainly stored in bulk. If the reserve falls to the ground, the vegetable oil supply may be even more tense.

To sum up, in the first quarter, it is expected that the total consumption of rapeseed will decrease. The new supply will be limited by the difficulty of the arrival of imported rapeseed,. Meanwhile, the emergency reserve may further reduce the inventory scale of rapeseed. The price of rapeseed will still be relatively resistant to decline, and the price gap between rapeseed and soybean oil will be widened. 

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