Oil crash corrodes vegoil prices and inflicts pressure on other agricultural products

Innovation & Technology

Caio Alves

Published Mar 9, 2020

Oil price suffers the biggest retraction since its fall at 1991 as the coronavirus and geopolitical tensions brace together for the lower demand in 10 years, when the world saw crude oil price to collapse over 50 dollars a barrel as a side effect of the housing bubble banking scheme (CDS).

All can be explained by a domino effect ignited JAN-20, when the COVID-19 crisis in China exploded, pushing demands down by a varied number of reasons ever reported by Tridge during the last weeks. Also as farmers take the high road to the biodieasel and ethanol mandates in the energy producing countries, agriculture goods tend to be more exposed in the energy market swings, highly linked as correlatives. US uses about 30% of its corn output into the ethanol production, while Brazil takes 60% of its cane crops, approximately.

Analysts say palm oil fell 11% in Malaysia and Dutch rapeseed lost more than 3%, considering those markets are strongly oriented towards biodiesel demand. Sugar took its toll and fell 6.5%. Other edible oils partially used on the biofuel production also had its prices sliced.

With a less attractive biodiesel the market eventually gets an oversupply of its feedstock, putting a lot of pressure on prices and on the concerning farmers.

At last Saudi Arabia promissed to boost its crude oil production and to offer 20% discount in some markets as a direct response to Russia's denial on cutting its oil output.

Dutch rapeseed oil prices are rated at €764/mt April loading FOB.
According to the CBOT soybean hit $8.76/bu ($322/mt), six weeks low in a row.