Oils: Neutral to Bullish

Market focus: Overnight, CBOT soybean oil experienced a notable rebound from its lows. After consecutive declines driven by market speculation that the EPA might issue up to 1.8 billion RINs biofuel waivers by the end of August, sources familiar with the matter, as cited by Reuters, indicated the EPA could increase the 2027 biofuel blending mandates by 500 million gallons to offset the impact of the waivers. This development lifted sentiment in the US soybean oil market. Market expectations now lean toward the EPA potentially announcing related policies on Friday, with continued attention on policy implementation.

Summary: Amid expectations of increased 2027 biofuel mandates, concerns over the EPA issuing a large number of waivers have significantly eased. The short-term rebound in US soybean oil is likely to provide support to Chinese vegetable oil futures. Soybean oil 01 contract has climbed back above 8800, with near-term attention on performance around the 9000 level; palm oil 01 has also regained the 10000 mark, with near-term focus on previous highs.

Rapeseed: Neutral to Bullish

Market focus: With the easing of biofuel waiver concerns and the rebound in US soybean oil, ICE canola closed up 0.71% overnight. The potential for an expanded Russia-Ukraine conflict has heightened logistical risks for Black Sea rapeseed and sunflower oil exports, continuing to provide support to the rapeseed complex. However, as time progresses, Canadian canola has officially entered the harvest phase. As of last week, harvest progress reached 1% in Saskatchewan and 3% in Manitoba. Attention now turns to the impact of advancing harvest progress on Canadian canola pricing.

Summary: With a stronger external market, the domestic rapeseed complex is expected to see a short-term boost. Rapeseed oil 11 contract faces resistance near 10700, while rapeseed meal 11 contract has pressure around 2400.

Soybean Meal: Neutral to Bullish

1. Reuters reported that the Trump administration is considering increasing the 2027 biofuel blending mandates by approximately 500 million gallons to offset the impact of higher-than-expected small refinery exemptions. Overnight, CBOT soybean oil rebounded, and alongside a stronger grain complex, CBOT soybeans extended their upward move.

2. As of August 25, the drought coverage ratio in US soybean-producing areas stood at 28%, a weekly increase of 2 percentage points. Current drought conditions are primarily concentrated in the Great Plains, the Delta region, and northern Minnesota, while core Corn Belt areas such as Iowa and Illinois have been relatively less affected. Forecasts indicate that rainfall across producing regions will be generally light over the next week, with cumulative precipitation expected to be no more than 10 millimeters in most areas, with virtually no rain expected in Missouri, Arkansas, and Mississippi. Meanwhile, maximum temperatures in Kansas, southwestern Iowa, and most of Missouri are projected to reach 37°C-42°C. The drier conditions are beneficial for draining overly wet fields in the eastern Corn Belt, but some regions in the Great Plains and Delta face risks of drought development.

3. Recently, domestic soybean meal futures have been advancing on increased open interest, driven by multiple bullish narratives. The 01 contract briefly broke through 3350 yuan/ton, reducing the safety margin for chasing highs in the short term. However, the medium-term expectation of a tightening new-crop US soybean balance sheet remains, and domestic soybean meal is likely to benefit from a rising import cost center. The strategy leans toward waiting for pullbacks before entering long positions.

Summary: Exercise caution when chasing highs; monitor the 01 contract's performance in the 3350-3400 yuan/ton range intraday.

No. 1 Soybean: Neutral

The Heilongjiang Meteorological Observatory indicates that due to a northeast cold vortex, the province will experience multiple rounds of precipitation in the near term, with localized heavy rain expected in central and eastern areas over the weekend. The current period is critical for soybean pod filling and grain filling, where short-duration heavy rainfall can easily cause field waterlogging, and strong winds can lead to crop lodging. At present, most traders are focusing on digesting existing inventories while awaiting the arrival of new-crop soybeans. Demand in consuming regions remains subdued due to persistently high temperatures, with downstream buyers replenishing only as needed. The recovery in end-user soybean product demand will take time. There has been no marginal change in the domestic soybean supply-demand dynamics, and the market continues to trade on expectations. As the market is currently in a weather-trading window, vigilance is warranted regarding capital re-engaging in speculation over new-crop production expectations.

Summary: Maintain a sidelines approach for outright positions; basis remains deeply negative, and enterprises holding physical inventory may consider participating in selling for delivery.

Peanut: Neutral

Market focus:
1. New-crop peanut prices stabilized overall yesterday. In Nanyang, new Baisha peanuts remained at 4.3-4.4 yuan/jin, while Kaifeng large peanuts were at 3.8-3.9 yuan/jin. Trading in Henan has slightly improved compared to recent days. Following earlier price declines, grassroots-level selling resistance is gradually emerging. Meanwhile, some oil mills have begun inquiring about prices, and there is an expectation of some restocking demand as the moisture content of new peanuts improves. However, end-user procurement remains primarily need-based, with no concentrated restocking yet.

2. Futures continued to weaken, with the PK2611 contract closing at 7980 yuan/ton. The stabilization of spot prices has yet to drive a significant recovery in futures, as the market continues to price in the upcoming supply pressure from Henan wheat-stubble and Shandong new-crop peanuts. In weather news, northern Shandong continues to experience heavy rainfall, which may temporarily disrupt the pace of new-crop peanut market entry locally, but this does not alter the overall expectation of gradually increasing supply.

Summary: Peanuts are expected to maintain a weak, range-bound pattern in the short term, with attention on support in the 7950-8000 area for PK2611. The slowdown in spot price declines and inquiries from some oil mills provide some support to futures, but new-crop supply continues to increase, and demand improvement has yet to be fully confirmed. Continue to remain on the sidelines for outright positions.

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