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Commentary
December bean oil may see some seasonal buying heading into the 4th quarter. Just my opinion. We don’t see diesel backing off much even if the Strait is fully opened. Big “if”. We think bean oil could follow diesel back up. The bigger issue in all of this might be that Russia has lost 51 percent of its refining capacity due to the targeted attacks by Ukraine. Longer term issue according to industry sources is the Chair of the Indonesian Palm Oil Assn. said with the expected tightening global palm oil supplies due to the El Nino, they see palm prices potentially trading at a premium to bean oil in 2027. The association sees Indonesian palm oil production in 2027 declining 3.7% from 2026 estimated level to 56.6 MMT, while the country’s demand for palm oil from the biodiesel industry is seen rising 18.5% to 17.4 MMT. With the expected decline in production, Indonesian palm oil exports are seen declining nearly 15% from this year to 26.5 MMT in 2027 which would be the lowest since 2016. We think bean oil given the bio diesel mandate and potential palm oil shortage in Asia leads prices eventually higher in our view.
Conservative
Buy the Dec Bean oil 75/80 call spread for 45 points or better. Cost and risk are $270 per spread plus commissions and fees.
Aggressive
Buy the May 27 Bean Oil 75 calls
Sell the 80/75 May Bean Oil put spread
Collect 100 points or $600 upon entry less trade costs and fees.
Margin $1205 per spread.
Max risk is $2400 plus commissions and fees.
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Sean Lusk
Vice President Commercial Hedging Division
Walsh Trading
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