A look at the price correlation among oils shows similar pricing trends.
‘Market reports often refer to the influence of other oilseed markets on the current or projected price of canola,’ says Neil Blue, crop market analyst with Alberta Agriculture and Forestry. ‘A closely related oilseed to canola is soybeans. Soybean oil is even more closely related to canola due to canola’s relatively high oil content and canola oil being substitutable for soybean oil in many markets.’
Blue explains that while palm oil is another substitutable oil for canola, canola oil has superior characteristics in most applications and commands a premium price.
Image 1. Price relation among canola, soybean oil, and palm oil
Source: barchart.com
‘Palm oil has become the world’s largest produced vegetable oil,’ states Blue. ‘Despite palm oil plants being native to Africa, Indonesia and Malaysia produce about 85 per cent of the world’s palm oil, with contributions to supply also from Thailand, Columbia and Nigeria.’
Blue says world palm oil production in 2020-21 is estimated at 72 million tonnes compared to soybean oil in second place at 60 million tonnes.
Palm oil has increasingly been used as a source of biodiesel over the last ten years,’ says Blue. ‘A significant amount of palm and other plant-based oils are used in biodiesel production, and for that reason, there is a relation of vegetable and canola oil prices to crude oil prices.’
Image 2: Price correlation between soybean oil and WTI crude oil
Source: barchart.com
‘These markets are not independent, but very much interrelated and complex, especially when considering all the factors such as politics, weather and currency swings that can affect any one of these commodities at any time,’ concludes Blue.
Source : alberta.ca