How High Can The Price Of Soybean Oil Go?

12.12.2016

Soybean oil is a vegetable oil extracted from the seeds of soybeans (SOYB). It is one of the most widely consumed cooking oils. Together with palm oil, they represent over 63% of the vegetable oil market.

Soybean oil is moving higher

Soybean oil is on a roll. After dropping to 26 cents last year, the rally has begun, and soybean oil has started to rise. At the time of writing, soybean oil is trading at around 37.26 cents.

Note that soybean oil itself wasn't at a supply deficit. The USDA estimates the production of soybean oil to be at 51.76 mmt, against a consumption of 51.63mmt, for the year 2015/16.

For the year 2016/17, the USDA estimates a supply at 53.65mmt, against a consumption of 53.61mmt.

Why did soybean oil rally strongly on the back of a supply surplus? The answer lies in palm oil. The El-nino in 2015 has had a delayed effect on palm tree plantations, and as a consequence, the effect of the drought has caused trees to produce less palm fruit, hence, less palm oil.


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