Since the run up in oil seed commodity pricing in 2008 I have been trying to find an indicator to help determine the direction of pricing. The first half of last year wasn’t too bad as the world was short on soybean oil so pricing pretty much followed the crude oil market. That lasted until August.
From August until October what I would call fundamentals came back in the picture, meaning the reports of large soy, corn and canola crop begin to weigh on investors’ minds and prices trended downward. It was still buoyed by higher crude prices.
October the crop reports became negative with concerns of a late harvest and frost. The oil seed markets moved upward and fell into their old ways of following the crude market. But also another indicator came into play, the weak value of the dollar, which put further pressure on supply as exports overseas increased.
December became a time for repositioning by investors with a quick drop followed by a spike in the market. From that peak there has been a drop of 300 points. This drop has come from several factors; The Oil Crop Outlook report on January 12 boosted soybean supplies by the ‘Best-Ever U.S. Crop’ and reported that international soybean production is expected to increase by 20% in Argentina and Brazil over last year, new policies and higher interest rates in the China, stronger dollar, weaker crude prices and probably an exit of investors to the orange juice market.
The ‘experts’ are expecting more sell offs by the funds groups leading to more downside pressure this week.
A little bit about Coconut oil. Coconut oil prices have moved up about 20% in the last month on shorter supplies, farmers holding back supplies and government support prices. There is some concern that El Nino will bring drier weather and a smaller palm crop which could support the Coconut oil price. But for now expect Coconut oil prices to remain firm until production season in March.