Vegetable oils have been in an up trend for two years. About every six months, vegetable oil has a major price correction that lasts three to five weeks and then resumes the uptrend. Lower bean oil had dragged soybeans down this month. Meanwhile soybean basis at the Gulf and domestic crushers continued to firm, which we have mentioned several times a week for a more than a month.
After making a contract high on April 29th, palm oil and bean oil had a major correction. Palm oil bottomed on May 20th and resumed the uptrend, but bean oil was mostly sideways to a bit lower and made the correction low last evening.
Soybeans were firm over night on rising basis and rising palm oil and finally rising bean oil. Then crude oil went from $110.27 today to over $114.50. Higher crude means more biofuel demand which means more bean oil demand which means higher bean oil prices which means higher soybean prices if meal is steady. Some place around the $11.60 area on July crude today, it began a decided move higher.
About 50 minutes ago, it was reported by Reuters that a Russian operated crude oil tanker, the Pegas, loaded with Iranian crude was seized off the coast of Greece. The oil was being transferred to another tanker to be unloaded in the USA.
The Pegas was one of five vessels which had been "designated for sanctions" by the USA two days before Russia invaded Ukraine, meaning it was open hunting season on the Pegas if seen in international waters. It was flying an Iranian flag.
The Pegas is owned by Russia's Transmorflot LTD, who changed the ship's name from Pegas to Lana on March 1 and has been flying the Iranian flag since May first.
Our first thought was this capture of a Russian crude oil tanker in international water was a very big deal, but after learning the vessel had been designated a pirate ship along with 4 other ships before the war meant this action should have been expected. The same action was taken against four vessels loaded with Iranian crude in 2020.
July crude futures peaked at $114.83 this early afternoon and is now at $114.33. The July contract high is $116.43 on March 7th. It looks like the rally is over unless Russian or Iran attacks US Navy vessels or any other vessels.
The real power behind the soybean rally is the ever firming basis... Today's crude oil rally was just a kick in the pants for the bean market.
We said last week we were bearish wheat, bullish corn and beans, but most bullish beans and we still are. We expect to see July beans over $18.00 before they quit trading and that might look cheap in another two months.