Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
Gold Price During Hyperinflation - 12th May 21
Stock Market Extending Phase Two? - 12th May 21
Crypto 101 for new traders – ETH or BTC? - 12th May 21
Stock Market Enters Early Summer Correction Trend Forecast Time Window - 11th May 21
GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
Cathy Wood Bubble Bursts as ARK Funds CRASH! Enter into a Severe Bear Market - 11th May 21
Apply This Technique to Stop Rushing into Trades - 10th May 21
Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
CHIA Getting Started SSD Crypto Mining by Plotting and Farming on Your Hard Drives Guide - 9th May 21
Yaheetech Mesh Best Cheap Computer /. Gaming Chairs on Amazon Review - 9th May 21
Breaking US Trade Embargo with Cuba - Build 7 Computers in 14 Hours Before Ship Sales Challenge - 9th May 21
Dripcoin Applies New Technology That Provides Faster Order Execution - 9th May 21
Capital Gains Tax Hike News: Was It REALLY to Blame for Sell-off? - 7th May 21
Stock Market Transportation Index Continues To Grind Higher - 7th May 21
SPX Stock Market Correction Arriving or Not? - 7th May 21
How to Invest in an Online Casino? - 7th May 21
Gold & Silver Begin New Advancing Cycle Phase - 6th May 21
Vaccine Economic Boom and Bust - 6th May 21
USDX, Gold Miners: The Lion and the Jackals - 6th May 21
What If You Turn Off Your PC During Windows Update? Stuck on Automatic Repair Nightmare! - 6th May 21
4 Insurance Policies You Should Consider Buying - 6th May 21
Fed Taper Smoke and Mirrors - 5th May 21
Global Economic Recovery 2021 and the Dark Legacies of Smoot-Hawley - 5th May 21
Utility Stocks Continue To Rally – Sending A Warning Signal Yet? - 5th May 21
ROIMAX Trading Platform Review - 5th May 21
Gas and Electricity Price Trends so far in 2021 for the United Kingdom - 5th May 21
Crypto Bubble Mania Free Money GPU Mining With NiceHash Continues... - 4th May 21
Stock Market SPX Short-term Correction - 4th May 21
Gold & Silver Wait Their Turn to Ride the Inflationary Wave - 4th May 21
Gold Can’t Wait to Fall – Even Without USDX’s Help - 4th May 21
Stock Market Investor Psychology: Here are 2 Rare Traits Now on Display - 4th May 21
Sheffield Peoples Referendum May 6th Local Elections 2021 - Vote for Committee Decision's or Dictatorship - 4th May 21
AlphaLive Brings Out Latest Trading App for Android - 4th May 21
India Covid-19 Apocalypse Heralds Catastrophe for Pakistan & Bangladesh, Covid in Italy August 2019! - 3rd May 21
Why Ryzen PBO Overclock is Better than ALL Core Under Volting - 5950x, 5900x, 5800x, 5600x Despite Benchmarks - 3rd May 21
MMT: Medieval Monetary Theory - 3rd May 21
Magical Flowering Budgies Bird of Paradise Indoor Grape Vine Flying Fun in VR 3D 180 UK - 3rd May 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Canola, the New Canadian Gold

Commodities / Agricultural Commodities Apr 30, 2012 - 10:12 AM GMT

By: Ned_W_Schmidt

Commodities

Best Financial Markets Analysis ArticleWhen last we visited on Agri-Foods, 2012 was declared Year of the Soybean. That certainly seems to be the way prices are acting. Since the beginning of 2012 the U.S. dollar price of soybeans has risen by near 28%, more than twice the performance of the S&P 500's 12%. Seems some farmers, particularly in the Midwestern U.S. soybean region, are beating the Street again. Importantly, such results are not an aberration. Since early 2007, a little more than five years ago, soybean prices are up more than a 100%, a quite favorable comparison to the S&P 500 being off by ~3%. Little wonder that Agri-Land prices have been so strong.


As the above chart portrays, soybean prices recently broke above US$15. That price represents a new 90-week high. In preparing that chart we were reminded of one of the older and more reliable technical indicators. In the days before computers hobbled technical analysis, we used graph paper to do our charts. When one came to the edge of the paper, the important decision was how to tape the new page to the old. How one did that was usually a good indicator of the future direction of price. When we "taped" the new page to the above chart, it was at the top.

Soybeans - Cash US$ / Bushell

Why have soybean prices broken out? In the remainder of this decade two of the more important shortages will be vegetable oils and meat. Soybeans are used to produce cooking oil and as feed for animals. In terms of consumption, soybean oil ranks number two in the world, second only to palm oil. Global demand for all edible oils has risen by 20% over the past four years.

The wonderful aspect of vegetable oil is price inelasticity for both demand and supply. Rising prices for cooking oil might make us grumble at the grocery store, but we will still buy it and use it as we have been. Anyone ready to substitute lard for oil on their salad or pasta?

More interesting may be that soybeans do not grow best just anywhere. Soybeans are grown in two lateral bands, one centered on the Midwestern U.S. in the Northern Hemisphere and another through Argentina and Brazil in the Southern Hemisphere. Those two bands provide the climatic conditions necessary for a full and happy soybean sex life. The land with adequate water and dirt in those two regions is limited. Higher demand for soybeans in the year ahead may lead to higher oilseed prices. However, in short and intermediate term those higher prices will have limited ability to increase supply.

Alternatives to the common sources of edible oils simply do not exist in abundance. Support for soybean prices is also coming from growing inadequacies of supplies of alternative oil producing grains. One of those alternatives is canola. The above graph portrays the supply situation for canola in terms of days of consumption in the bins at the end of the crop year. While bountiful supplies of canola had been available, the production surplus has been consumed. As the short supply situation in canola continues to deteriorate the price of that grain cold rise dramatically, supporting the price of soybeans. Canola farmers in Canada are likely to experience some of their most profitable years ever.

Canola is grown north of the soybean band in the Northern Hemisphere. Canada is the largest national producer of canola. That production will increasingly be diverted to China to satisfy growing demand for edible oils and animal feed. Canola is quite likely to become the new Canadian Gold.

Rather than chasing land in the Midwestern U.S. at auctions, investors might want to consider Agri-Land in Canada. We do expect to see more canola farmers wintering here in Florida this fall after the harvest, with many driving their new Bentley. Agri-Food is a complex system composed of numerous commodities with both independent and interdependent relationships and opportunities. When the iPhone has faded from memories, China will still be importing canola from Canada.

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