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Turner's Take Ag Marketing | Natural Gas & Soybean Oil Lead Markets Higher

By: Craig Turner, Senior Risk Management Consultant

Natural Gas & Soybean Oil Lead Markets Higher
 
Craig Turner
Senior Risk Management Consultant
craig.turner@stonex.com

Natural Gas

 

Natural gas is making new contract highs today as December briefly traded $6.50.  The first chart below is for Dec 2021 Today's move feels like short covering due to margin calls.  NG is higher in Europe and the UK again and that is a contributing factor to the rally.

The second chart below is monthly and goes back to 1991.  When the natural gas market is tight and over $6, priced tend to trade in a $6 to $8.50 range.  Will this be the new range for NG?  It could be if the US can't increase supply to meet demand this winter. 

The Natural Gas shortage is not just an energy issue heading into winter. This could also be a global food supply problem due to the high cost/shortage of fertilizer for our next crop cycle.  Here is a good article about this fertilizer issue

Daily Dec 2021 NG Chart

Monthly 30 Year NG Chart

 

 

 

Soybean Oil

 

Dec Soybean Oil broke out of it's wedge today.  Palm Oil and Canola both hit all time highs and that lead to money flow into soybean oil.  This could be an interesting market going forward.  Soybean oil exports have been disappointing so demand will have to come domestic use.  There will be a large demand for renewable biodiesel in the US for years to come and it reminds us of the ramp up in corn for ethanol 15 years ago.  If soybeans are crushed for oil then meal could come under a lot of pressure. Will the US start exporting more meal and less whole soybeans?  What happens when users of canola are forces to switch to an alternative vegetable oil?  Soybean Oil is in the greatest supply out of the four major edible oils (palm, canola/rapeseed, sunflower, and soybean oil).  

The soybean complex has a lot of issues to work out over the next few months.  For now soybeans have support at $12 due to the vegetable oil supply tightness.  Keep in mind harvest lows tend to be made between early September and mid October.  Once corn and soybeans are more than 50% harvested we see less farmer selling pressure and end user buying picks up.  Next week the US should be close or past the half way mark for corn and soybeans.

Dec Soybeans Oil

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