Global vegetable oil prices are soaring, with US soyoil and Malaysian palm oil prices hitting more-than-two-year highs.
Prices appear to be getting support from weak production, and tight stocks, in Asian markets.
But analysts struggled to explain the strength, given the huge and high quality US soybean harvest.
El Nino still lingers
Output in Malaysia, the world's second ranked palm oil producer after Indonesia, is still being affected by last year's El Nino drought.
September production in Malaysia rose by just 0.8% from the August, to 1.72m tones the lowest output figure for September since 2010.
But Edward Hugo, at VSA Capital, said the data on production was "confirmation of what we were expecting".
"I don't think it was that unexpected," he said.
"The only thing I can see is positive is the [palm oil] stocks numbers," he said.
September palm oil stocks in Malaysia were seen at 1.55m tonnes, up some 83,000 tonnes from last month, but still down 41% year on year.
Stocks will start to build
Still, Mr Hugo was downbeat on sort term prospects.
"You would think there would be a bearish tone," he said, noted the large and high quality US soybean harvest, prompt soybean sowings in Brazil, and the fact that the in South East Asia, palm oil production was about to see a seasonal increase.
"Stocks will start building," and exports will remain non-exciting," he said.
Over the next few months, Mr Hugo said the palm oil market was "more likely to come down than up".
Struggling to rationalise strength
"Shortage, or tight supplies of vegetable oils in Asian is offering support to the vegetable oil market and therefore the soybean market," said Kim Rugel, at Benson Quinn Commodities.
"I started looking at world veg oil demand and supplies last week but could not rationalise how oil could lead a bean rally for long," Ms Rugel said.
"But here we are today with beans strongly higher, palm oil trading at highest since March 2014, soyoil higher since August 2014 and canola trading at 6 month highs."
Ms Rugel noted the long term decline in the stocks-to-use ratio of both palm oil and soybean oil.
Lower Argentine planting
Analysts also noted ideas of lower soybean planting in Argentina, the world's top soyoil exporter.
Commerzbank noted that "the strong preference for soybean planting is being reduced in favour of corn planting in Argentina following a shift in agricultural policy.
The Argentine government will keep in place an export tax on soybeans, which will discourage planting of the oilseed, with farmers expected to favour corn, on which there are no tariffs.
And Ms Rugel suggested that in South America, the oilseed market is also "ready to work some weather risk premiums into market on pending La Nina weather this season".
A La Nina winter could bring dry weather for Argentina this season, and for next year's US soybean crop.
January palm oil futures in Malaysia finished up 3.6%, at 2,822 ringgit a tonne, the highest level for since March 2013.
December soybean oil futures in Chicago were up 2.1% in morning deals, at 35.85 cents a pound, their highest level since 2014.
Fount: http://www.agrimoney.com/news/investors-mull-over-vegoil-market-strength--10059.html
Prices appear to be getting support from weak production, and tight stocks, in Asian markets.
But analysts struggled to explain the strength, given the huge and high quality US soybean harvest.
El Nino still lingers
Output in Malaysia, the world's second ranked palm oil producer after Indonesia, is still being affected by last year's El Nino drought.
September production in Malaysia rose by just 0.8% from the August, to 1.72m tones the lowest output figure for September since 2010.
But Edward Hugo, at VSA Capital, said the data on production was "confirmation of what we were expecting".
"I don't think it was that unexpected," he said.
"The only thing I can see is positive is the [palm oil] stocks numbers," he said.
September palm oil stocks in Malaysia were seen at 1.55m tonnes, up some 83,000 tonnes from last month, but still down 41% year on year.
Stocks will start to build
Still, Mr Hugo was downbeat on sort term prospects.
"You would think there would be a bearish tone," he said, noted the large and high quality US soybean harvest, prompt soybean sowings in Brazil, and the fact that the in South East Asia, palm oil production was about to see a seasonal increase.
"Stocks will start building," and exports will remain non-exciting," he said.
Over the next few months, Mr Hugo said the palm oil market was "more likely to come down than up".
Struggling to rationalise strength
"Shortage, or tight supplies of vegetable oils in Asian is offering support to the vegetable oil market and therefore the soybean market," said Kim Rugel, at Benson Quinn Commodities.
"I started looking at world veg oil demand and supplies last week but could not rationalise how oil could lead a bean rally for long," Ms Rugel said.
"But here we are today with beans strongly higher, palm oil trading at highest since March 2014, soyoil higher since August 2014 and canola trading at 6 month highs."
Ms Rugel noted the long term decline in the stocks-to-use ratio of both palm oil and soybean oil.
Lower Argentine planting
Analysts also noted ideas of lower soybean planting in Argentina, the world's top soyoil exporter.
Commerzbank noted that "the strong preference for soybean planting is being reduced in favour of corn planting in Argentina following a shift in agricultural policy.
The Argentine government will keep in place an export tax on soybeans, which will discourage planting of the oilseed, with farmers expected to favour corn, on which there are no tariffs.
And Ms Rugel suggested that in South America, the oilseed market is also "ready to work some weather risk premiums into market on pending La Nina weather this season".
A La Nina winter could bring dry weather for Argentina this season, and for next year's US soybean crop.
January palm oil futures in Malaysia finished up 3.6%, at 2,822 ringgit a tonne, the highest level for since March 2013.
December soybean oil futures in Chicago were up 2.1% in morning deals, at 35.85 cents a pound, their highest level since 2014.
Fount: http://www.agrimoney.com/news/investors-mull-over-vegoil-market-strength--10059.html
