Summary:
On the evening of November 1, Beijing time, the news that the leaders of China and the United States had a call on economic and trade issues, and that the leaders of the two countries would meet formally during the G20 meeting in Argentina, triggered sharp fluctuations in oil and grease soybean Up more than 3%, domestic Soybean meal 1901 was once the limit of decline. Soybean oil 1901 also led the decline of oil and fat by more than 2%. Soybean oil 1901 hit a new low in the year.
The communication between the leaders of China and the United States triggered the market's expectation that the Sino US trade relationship might turn around, temporarily diluting the concern that the soybean import volume in the next three months will decrease significantly year on year, and the premium of the uncertainty of Sino US trade relations in soybean oil futures prices was squeezed out.
Oil inventory, especially soybean oil inventory, is high, and it is difficult to significantly reduce soybean oil inventory before the end of 2018. In addition, soybean oil spot price is significantly discounted futures, which is the fundamental reason why soybean oil 1901 is significantly weaker than other oils and soybean oil contracts in other months.
1、 Event:
On the evening of November 1, Beijing time, President Trump of the United States tweeted that the leaders of China and the United States had talked on the phone, mainly focusing on economic and trade issues between China and the United States. Later, White House economic adviser Cudlow said that the leaders of the two countries would hold formal meetings during the G20 meeting in Argentina. On that night, the futures prices of oil and grease began to fluctuate violently. CBOT soybeans rose by more than 3%, domestic soybean meal fell by the limit of 1901, and soybean oil 1901 also led the decline of oil and grease by more than 2%. Soybean oil 1901 hit a new low in the year.
2、 Drivers and future development
The communication between the leaders of China and the United States on economic and trade issues triggered the market's expectation that the Sino US trade relations might turn around. Based on this expectation, the expectation of the trend of soybean related commodities changed, and the weakness of soybean oil itself's fundamentals made the soybean oil futures contracts in the recent months hit a new low in the year.
Anticipation of a turnaround in Sino US trade relations
In the past two days, the Chinese and American governments and leaders have both released some positive messages:
1. Trump said in an interview with Fox magazine that he expected to reach a major agreement with China.
2. At the meeting of the Political Bureau on October 31, it was proposed that the current situation "changes while maintaining stability", referred to the business difficulties of enterprises, and for the private economy, it was proposed to adhere to the "two unswervingly", promote the common development of diversified ownership economies, and study the difficulties encountered in the development of private enterprises and small and medium-sized enterprises.
3. On November 1, when meeting with seven US Republican lawmakers who visited China, the Chinese leader said that he hoped that China and the United States could make concessions on trade frictions.
4. On the evening of November 1, the leaders of China and the United States had a telephone conversation, mainly focusing on bilateral economic and trade issues. Subsequently, the White House economic adviser said that the leaders of the two countries would formally meet during the G20 meeting.
Compared with September, the economic and trade relations between the two countries were tense: Trump resolutely imposed tariffs on China's 200 billion imported goods, and China and the United States cancelled the economic and trade negotiations at the vice ministerial level originally scheduled for the end of September. The interaction between the two countries in the past two days has raised the market's expectation of a turnaround in Sino US trade relations. Based on this expectation, the market's expectation that China will begin to import American soybeans has risen, and the concern about the sharp year-on-year decline in soybean imports has cooled. If China starts to import American soybeans, the annual growth rate of China's soybean imports may not decline, while the growth rate of China's oil consumption has dropped to less than 2% (according to the monthly supply and demand report of the Ministry of Agriculture and Rural Affairs, the growth rate has been less than 1%), so the stock of soybean oil will also rise.
How to develop the economic and trade relations between China and the United States will become the focus of the market in the next two months. Here we suggest that we can observe the development of events from the following two time points and two targets.
First of all, at the time point, focus on November 6, the mid-term elections in the United States. Whether the Republican Party can control the Senate and the House of Representatives is crucial to Trump's later governance. Pay attention to whether the official meeting between the leaders of China and the United States during the G20 meeting in Argentina held from November 30 to December 1 can deliver a specific trade agreement, which will become an important judgment basis for market transactions.
Secondly, focus on the US dollar index and the US stock market. If the US dollar index remains strong and the US stock market continues to adjust, Trump will face greater pressure to govern.
Therefore, there are still many uncertainties in the Sino US economic and trade relations in the next month or more, and excessive expectations will increase the volatility of the market.
The fundamentals of oil, especially soybean oil, are empty
At present, the domestic oil and fat fundamentals are relatively negative, as shown in the following aspects:
1. The total oil inventory is high. The total oil inventory of the three major oils exceeds 2.77 million tons, and the soybean oil inventory exceeds 1.8 million tons, rising for two consecutive months. At present, the soybean stock of the coastal oil factory is 6.89 million tons, and the soybean is expected to arrive in Hong Kong more than 12 million tons in the next two months. According to this trend, the soybean oil stock may begin to decline in the middle and late December.
2. Rapeseed, rapeseed oil Palm The import volume of oil in the next two months will increase slightly year on year. In November and December, more than 720000 tons of 24 ° palm oil will arrive in Hong Kong, basically the same as last year; In November and December, nearly 1 million tons of rapeseed will arrive in Hong Kong, 780000 tons in the same period last year; More than 150000 tons of vegetable oil will arrive at the port in November and December, up from 100000 tons in the same period last year.
3. Palm oil and rapeseed are in sufficient supply. Malaysia and Indonesia are in the period of increasing production of palm oil, while exports are declining, and inventories are expected to continue to rise. Canadian rapeseed is being harvested. The output of Canadian rapeseed has not changed much this year. The export to China is expected to increase to 5 million tons, up from 4.6 million tons last year.
4. The soybean oil futures contract in recent months has significantly increased the spot price. At present, Y1901 premium level 4 soybean oil spot price exceeds 350 yuan.
5. High inventory pushed up the pressure of storage capacity, and storage costs soared.
6. The growth rate of oil demand is insufficient, and the annual growth rate of oil demand has dropped to less than 2%.
Originally, supported by the expected reduction of soybean imports, the price of soybean oil has a certain premium from Sino US trade friction. But if China starts to import American soybeans, American and western soybeans can arrive at home as soon as late December. Soybean oil stocks may rise again after a small decline, and the overall supply pressure of oil and fat is not reduced. Therefore, soybean oil 1901 today fell below the support of 5580-5600, Hit a new low this year. The lower support is relatively weak, and it is expected that there will still be a 200-400 point drop.
The rebound of oil depends on soybean oil
The future market of oil still depends on soybean oil and palm oil. Palm oil production area is still in the cycle of increasing production and inventory for the time being, so now it mainly focuses on soybean oil.
Due to the uncertainty of Sino US economic and trade relations, the decline in soybean imports due to the decline in crushing profits will still be an opportunity for oil de stocking in the next three months, as well as a driving force for oil rebound. The difference between expectation and reality will determine the strength of the rebound.
3、 Risk warning
1. There is still uncertainty in China US economic and trade relations. At present, there are only expectations for peace talks. There is still a lot of process to reach an agreement. The development of the situation may be repeated. Pay attention to the difference between expectations and reality, as well as the timing. The volatility of the market will still be great in the coming months.
2. If the Sino US economic and trade relationship really gets substantial progress, the market expects that China will import a large amount of US soybeans, which will push up the CBOT soybean price and the US soybean export quotation, and the crushing profit of domestic oil plants may deteriorate significantly, thus the actual soybean import volume is less than the expected growth.
Shenyin Wanguo Futures Team 1
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Editor in charge: Song Peng
