Are Crude And Soybeans Getting Divorced?
It's happened to me a couple of times. Things change when you get divorced don't they? Usually the locks in my case. Well it may be happening to crude oil and soybeans, or maybe they're just going through a bad patch...
In a fairly recent development, as biofuel consumption has grown with the global push towards energy from renewable sources, the price of soybeans and crude oil has become inextricably linked.
Here's a chart of the percentage price change of spot month crude oil and Chicago soybeans this year:
Over the last few weeks however has crude has continued to fall, signs have been emerging of a shift back to the good old days of trading the fundamentals for beans, and the relationship between the two is running less in tandem.
Here's the same chart just looking at the last couple of months:
There is a marked difference in divergence since the beginning of October, where beans have largely levelled out whilst crude has continued to fall.
This may indicate that soybeans have finally found their proper value, and may not be as badly threatened by further price falls in crude as may have previously been the case.
Certainly OPEC members will be doing all they can to insure against crude falling further from current three year lows, with countries like Iran and Venezuela needing oil prices nearer $90/barrel to balance their books.
There is even talk of roping in non-OPEC members like Russia, who also have a vested interest in seeing the price back up, to also threaten production cuts in the months ahead.
In a fairly recent development, as biofuel consumption has grown with the global push towards energy from renewable sources, the price of soybeans and crude oil has become inextricably linked.
Here's a chart of the percentage price change of spot month crude oil and Chicago soybeans this year:
Over the last few weeks however has crude has continued to fall, signs have been emerging of a shift back to the good old days of trading the fundamentals for beans, and the relationship between the two is running less in tandem.
Here's the same chart just looking at the last couple of months:
There is a marked difference in divergence since the beginning of October, where beans have largely levelled out whilst crude has continued to fall.
This may indicate that soybeans have finally found their proper value, and may not be as badly threatened by further price falls in crude as may have previously been the case.
Certainly OPEC members will be doing all they can to insure against crude falling further from current three year lows, with countries like Iran and Venezuela needing oil prices nearer $90/barrel to balance their books.
There is even talk of roping in non-OPEC members like Russia, who also have a vested interest in seeing the price back up, to also threaten production cuts in the months ahead.