Commodity Blog

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Cooking Oil Prices in Uptrend on Drought and Elevated Demand

April 17, 2012 at 15:41 by Andriy Moraru

The ongoing drought in South America, the biggest oilseed producer in the world, continues to heat up the prices of everything related to cooking oil — from soybeans to palm oil. Meanwhile, experts’ forecasts project an elevated demand for this type of agriculture in Asia this year despite the overall decline in commodity consumption.

The US farmers have switched a significant part of their fields from the oilseed (mainly soybean) to corn on a higher corn prices last year. Now the lack of the soybean crops is driving the commodity up. It’s in a strong uptrend since mid-December of 2011. The US Department of Agriculture forecasts that the reserve-to-demand ratio for the main oil plants will fall this year to the lowest levels in decades.

Decreasing production of the soybean oil may spur the growth in palm oil market. Palm oil is the most popularly consumed edible oil in the world and, while its production isn’t affected by such adverse weather conditions as soybean. Its demand is going to grow this year. Market analysts expect the palm oil to be in an uptrend at least until the fourth quarter of 2012 when the commodity surplus reaches its peak.

Soybean rose from $14.2125 to $14.3000 per bushel as of 15:35 GMT on CBoT today. Soybean oil went up from $0.5573 to $0.5615 per pound during the day.

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