Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Stock Market Investing LESSON - Buying Value - 27th Nov 21
Corsair MP600 NVME M.2 SSD 66% Performance Loss After 6 Months of Use - Benchmark Tests - 27th Nov 21
Stock Maket Trading Lesson - How to REALLY Trade Markets - 26th Nov 21
SILVER Price Trend Analysis - 26th Nov 21
Federal Reserve Asks Americans to Eat Soy “Meat” for Thanksgiving - 26th Nov 21
Is the S&P 500 Topping or Just Consolidating? - 26th Nov 21
Is a Bigger Drop in Gold Price Just Around the Corner? - 26th Nov 21
Financial Stocks ETF Sector XLF Pullback Sets Up A New $43.60 Upside Target - 26th Nov 21
A Couple of Things to Think About Before Buying Shares - 25th Nov 21
UK Best Fixed Rate Tariff Deal is to NOT FIX Gas and Electric Energy Tariffs During Winter 2021-22 - 25th Nov 21
Stock Market Begins it's Year End Seasonal Santa Rally - 24th Nov 21
How Silver Can Conquer $50+ in 2022 - 24th Nov 21
Stock Market Betting on Hawkish Fed - 24th Nov 21
Stock Market Elliott Wave Trend Forecast - 24th Nov 21
Your once-a-year All-Access Financial Markets Analysis Pass - 24th Nov 21
Did Zillow’s $300 million flop prove me wrong? - 24th Nov 21
Now Malaysian Drivers Renew Their Kurnia Car Insurance Online With Fincrew.my - 24th Nov 21
Gold / Silver Ratio - 23rd Nov 21
Stock Market Sentiment Speaks: Can We Get To 5500SPX In 2022? But 4440SPX Comes First - 23rd Nov 21
A Month-to-month breakdown of how Much Money Individuals are Spending on Stocks - 23rd Nov 21
S&P 500: Rallying Tech Stocks vs. Plummeting Oil Stocks - 23rd Nov 21
Like the Latest Bond Flick, the US Dollar Has No Time to Die - 23rd Nov 21
Why BITCOIN NEW ALL TIME HIGH Changes EVERYTHING! - 22nd Nov 21
Cannabis ETF MJ Basing & Volatility Patterns - 22nd Nov 21
The Most Important Lesson Learned from this COVID Pandemic - 22nd Nov 21
Dow Stock Market Trend Analysis - 22nd Nov 21
UK Covid-19 Booster Jabs Moderna, Pfizer Are They Worth the Risk of Side effects, Illness? - 22nd Nov 21
US Dollar vs Yields vs Stock Market Trends - 20th Nov 21
Inflation Risk: Milton Friedman Would Buy Gold Right Now - 20th Nov 21
How to Determine if It’s Time for You to Outsource Your Packaging Requirements to a Contract Packer - 20th Nov 21
2 easy ways to play Facebook’s Metaverse Spending Spree - 20th Nov 21
Stock Market Margin Debt WARNING! - 19th Nov 21
Gold Mid-Tier Stocks Q3’21 Fundamentals - 19th Nov 21
Protect Your Wealth From PERMANENT Transitory Inflation - 19th Nov 21
Investors Expect High Inflation. Golden Inquisition Ahead? - 19th Nov 21
Will the Senate Confirm a Marxist to Oversee the U.S. Currency System? - 19th Nov 21
When Even Stock Market Bears Act Bullishly (What It May Mean) - 19th Nov 21
Chinese People do NOT Eat Dogs Newspeak - 18th Nov 21
CHINOBLE! Evergrande Reality Exposes China Fiction! - 18th Nov 21
Kondratieff Full-Season Stock Market Sector Rotation - 18th Nov 21
What Stock Market Trends Will Drive Through To 2022? - 18th Nov 21
How to Jump Start Your Motherboard Without a Power Button With Just a Screwdriver - 18th Nov 21
Bitcoin & Ethereum 2021 Trend - 18th Nov 21
FREE TRADE How to Get 2 FREE SHARES Fractional Investing Platform and ISA Specs - 18th Nov 21
Inflation Ain’t Transitory – But the Fed’s Credibility Is - 18th Nov 21
The real reason Facebook just went “all in” on the metaverse - 18th Nov 21
Biden Signs a Bill to Revive Infrastructure… and Gold! - 18th Nov 21
Silver vs US Dollar - 17th Nov 21
Silver Supply and Demand Balance - 17th Nov 21
Sentiment Speaks: This Stock Market Makes Absolutely No Sense - 17th Nov 21
Biden Spending to Build Back Stagflation - 17th Nov 21
Meshing Cryptocurrency Wealth Generation With Global Fiat Money Demise - 17th Nov 21
Dow Stock Market Trend Forecast Into Mid 2022 - 16th Nov 21
Stock Market Minor Cycle Correcting - 16th Nov 21
The INFLATION MEGA-TREND - Ripples of Deflation on an Ocean of Inflation! - 16th Nov 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Hot Oil Anyone?

Commodities / Agricultural Commodities Mar 29, 2012 - 10:25 AM GMT

By: Ned_W_Schmidt

Commodities

The topic of hot oil probably conjures up fantasies that are beyond the boundaries for this public discussions. And no, neither are we referring to the oil made into gasoline, though the price of that oil has been hot lately. We are referring to that oil which goes on your salad, used to fry your dinner, or is a critical ingredient in many of our favorite foods. We are talking here about vegetable oils, or edible oils. While not a regular topic for investors, it may become one as edible oil prices could get hot in coming years.


Top three edible oils ranked by size are palm oil, soybean oil, and rapeseed. The latter being known as canola oil to most. Together those three represent ~80% of the world's edible oil consumption. In terms of size by weight, the world consumes 150+ million tons each year. For comparison, that is ~60% of the size of the world's total production of soybeans.

Several factors contribute to our interest in edible oils. First, demand is near perfectly price inelastic. That means you are going to put it on your salad or fry in it regardless of the price. Second, production of edible oils is limited to a few companies. Third, global inventories are only about 30-35 days of consumption, making edible oil prices vulnerable to supply tightening and disruptions due to weather. Fourth, over the most recent four years total global demand has grown by 20%. Fifth, China and India are net importers of edible oils and will remain so. For more discussion on this topic see the April issue of Agri-Food Value View.

Above chart is of the U.S. dollar equivalent price of palm oil in Malaysia. Indonesia is the other major producer. With help from the unhappy soybean situation in South America, palm oil prices are moving toward the 90-week high. Over the most recent four years demand for palm oil, the most used edible oil in the world and in particular in Asia, rose ~25%. Those factors have contributed to the strength in palm oil prices.

Edible oils may develop may as a critical vulnerability in the global Agri-Food system. Over the past five years the increase in palm oil prices has ranked number four of the fifteen Agri-Commodities we follow. We expect palm oil prices to continue rising in the future, with the natural up and downs of all Agri-Commodities, due to rising import needs of Asia bumping up against a limited source of supply.

Soybeans is perhaps the edible oil source most likely to compete with palm oil. Soybeans also will likely remain in generally short supply for the foreseeable futures. Could soybeans become the new "corn" as corn prices decline to perhaps $5+ after the Fall harvest in North America?

Primary beneficiaries of this trend in the public company arena include Wilmar International and ADM. BG also is a producer of edible oils and should benefit. All three of these opportunities should be considered for core positions within investment portfolios. Investors should be researching these companies for the opportunities they might offer as edible oils get hot in the years ahead.

9th Agri-Food Commodities: An Investment Alternative, April 2012, is set for release late next week. This report, ~140 pages, is the definitive quarterly review of returns produces by Agri-Commodities versus U.S. and Chinese equities, U.S. government bonds, U.S. Treasury bills, and Gold. This edition begins the only major exploration of the Agri-Commodity component of commodity indices. Learn why your portfolio is simply inefficient without exposure to Agri-Commodities.

By Ned W Schmidt CFA, CEBS

AGRI-FOOD THOUGHTS is from Ned W. Schmidt,CFA,CEBS, publisher of The Agri-Food Value View, a monthly exploration of the Agri-Food grand cycle being created by China, India, and Eco-energy. To contract Ned or to learn more, use this link: www.agrifoodvalueview.com.

Copyright © 2012 Ned W. Schmidt - All Rights Reserved

Ned W Schmidt Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in