With strong global demand trends, a slowdown in the growth of palm oil production and the discount of palm to other oils, nearby Palm Oil futures find major support and bottoming action near the 2,300 to 2,100 level.
As we observed in our past research , soybean oil prices often lead the movement in crude oil prices. The past year has been no exception. Even as WTI crude prices soared from $42 to $66 per barrel between June 22, 2017, and January 25, 2018, soybean oil traders weren’t buying in. Soybean oil prices peaked on November 9, 2017, at 35.38 U.S. cents per pound and began a 10% sell off that started two and a half months before the recent peak in crude oil prices (Figure 1). This is the eleventh such episode of soybean oil prices leading crude oil prices since 2005.
Industry experts Dave Hightower, Founding Principal of The Hightower Report, and Dan Basse, President of AgResource Company, preview the March 8 USDA report discussing corn and soybean yields in advance of its publication.
Our recent article on options on agricultural products marveled at the relatively low prices of at-the-money (ATM) options, especially in the face of a gathering La Niña, albeit a relatively mild one so far. As interesting as ATM options are, out-of-the-money (OTM) puts and calls are also telling their own story, arguably an even more perplexing one.
If you ask options traders, the risk for corn, wheat, soybeans and soy meal is strongly skewed to the upside. For each of these commodities, options traders require a much higher premium on OTM calls (with strikes above the current price) than OTM puts (with strikes below the current price) (Figures 1 to 4). This suggests a greater fear for prices to move up than down.