Bumper Crops Depress Oil Prices: A Review

(IngredientNews) – Michael Lane, Oil Category Manager at International Food Products, recently revealed the latest news on vegetable oil prices and trends. During International Food Products’ webinar, he shared up-to-the-moment information on influences impacting the vegetable oil market and what it means to ingredient buyers.

Here’s what he had to say:

From a year ago

In comparison to last year, US corn production, ending stocks, US soybean production and soybean ending stocks are all up, as reported in WASDE’s latest 14/15 report. This leads to longer-term price stability.

Factors helping lower prices include

• Vastness of the North and South American crop
• Relatively manageable geo-political crises
• Strength in the equities markets
• Calm in EU financial landscape

What could affect prices today?

Corn, soybeans and soybean oils are at life-of-contract lows, as of Sept. 4. It has been reported that as many as eight crush facilities will be shut down for maintenance in Sept. because they cannot source enough beans to crush. Soybeans harvested early will be fought over between exporters and domestic crushers. Transportation shortages will add to the near-term basis strength. Many soybean processors are sold out for Sept., and that situation may roll into early Oct. Finally, any weather-related soybean harvest delays will exacerbate the situation, resulting in hard to access oil.

Possibilities to watch for

• Early harvested soybeans potentially being used for export or domestic crush
• Plentiful farmer on-farm storage
• Economic health of US farmers
• Farmer’s decision to sell beans and potentially store corn or vice versa
• Severe rail and truck shortages
• Weather related harvest delays

Our Recommendations

For the next 30 days, expect a narrow trading range and a firm basis before it settles down. Bottom line, if you aren’t booked for oil in Sept. – book now.