Bean Oil Bullish Inputs
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Commentary
Two large Ukrainian sunflower oil processing plants are suspending operations due to security risks and that supported a small push higher in bean oil this morning. Soybeans were supported today after China encouraged the US to move forward with reducing tariffs to create a more favorable environment for additional US Ag purchases. There was also chatter that Indonesia's biofuel use in December is estimated to increase to 16.74 million kL or (Kiloliters) up from 13.87 forecast for this month as mandatory B50 blend is being sold by all gas stations across the country. One of the processing plants belongs to Kernel, the world’s largest sunflower oil producer and exporter, which has previously suspended operations due to Russian strikes earlier this year. It is our belief that the loss of sunflower oil movement via the Black Sea forces major buyers, namely the world’s top buyer, India, back into the market for alternative supply, mostly palm and soybean oil. What’s worth noting is that part of the issue here is the degradation of power infrastructure within Ukraine, which has been a major focus of Russia’s air campaign this fall and has the potential for broader downstream impact. The second sunflower oil producer, Delta Wilmar Ukraine, has now announced a suspension of operations of their own. This is not the first time either company has been forced into shutdowns due to Russian attacks, but the fact that all facilities are offline is significant, with the biggest question being how long the disruption lasts. Any thoughts of tensions easing between these countries is in my view foolish. The War in Europe is intensifying with bean oil production in the Black Sea scuttled. Trade idea below.
Trade Idea
Bean Oil-May 2027 options
Buy the May 75 calls
Sell the May 80/75 put spread
ZLK27C7500:P7500:8000[3
| P] |
Collect 320 points from entry.
Max risk is 180 points or $1080 per spread plus commissions and fees.
Margin 725.00 per spread.
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Sean Lusk
Vice President Commercial Hedging Division
Walsh Trading
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