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Soybean Oil Prices to Rise by 4% in 2022 Over Increase in Demand for Biofuels

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Soybean Oil

In 2022, global soybean oil prices, driven by an increase in the demand for biofuels, have been projected to rise by about 4 percent, to $1,425 per tonne; a market report from IndexBox reveals.

According to the IndexBox report, the growing demand for biofuels, especially in Asia, will increase the prices of soybean oil globally.

The platform put it that in 2021, the average annual soybean oil price rose by 65 percent year-on-year to $1,385 per tonne, from $838 per tonne. Strong demand and high freight rates in China, which is the world’s second-largest importer of soybean oil, resulted in the most rapid price growth of the commodity in the third quarter (Q3) of the same year. Weather-related disruptions to production in South America also caused soybean oil prices to rise fast.

In 2020, IndexBox estimates that soybean oil purchases in the foreign markets rose by 7.5% to 13 million tonnes, increasing for the second year in a row after three years of decline. In value terms, soybean oil imports have grown notably to $10.3 billion.

India was the highest importing country with a purchase volume of around 3.7 million tonnes, accounting for 28% of global supplies. China ranked second with a purchase volume of 963 thousand tonnes.  Algeria (670 thousand tonnes) and Bangladesh (666 thousand tonnes) were ranked as the third and fourth major importing country.

The four countries altogether accounted for about 17% of total soybean oil imports. Coming behind as the fifth-highest importer is Morocco (547 thousand tonnes), followed by Mauritania (537 thousand tonnes), Peru (521 thousand tonnes), South Korea (390 thousand tonnes), Colombia (378 thousand tonnes), Venezuela (373 thousand tonnes), Egypt (243 thousand tonnes), Poland (229 thousand tonnes) and Nepal (215 thousand tonnes).

India in value terms ($3 billion) being the largest market for soybean oil imports in the world, accounted for 29 percent of global imports. The second position in the ranking was taken by China ($725 million) with a 7 percent share. North African country, Algeria came third with a share of 4.6 percent of the total value.

Top Soybean oil exporters

In 2020, Argentina was the major exporter of soybean oil (5.3 million tonnes), constituting 42% of total exports. The United States (1238 thousand tonnes), Brazil (1110 thousand tonnes), Paraguay (631 thousand tonnes), the Netherlands (615 thousand tonnes) and Russia (611 thousand tonnes) follow, altogether accounting for 33% of global supplies. Meanwhile, Spain (387 thousand tonnes), Bolivia (377 thousand tonnes), Ukraine (302 thousand tonnes), Turkey (208 thousand tonnes) and Germany (192 thousand tonnes) had relatively small shares in the total volume.

In value terms, Argentina remains the largest supplier of soybean oil in the world ($ 3.7 billion), which accounts for 39% of global exports. The United States ($ 979 million), with a share of 10% of the total supply is ranked second. Both countries are followed by Brazil with an 8% share.

Joy Uyino is an avid writer who specializes in stories relating to business, agriculture, technology, education and health.

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Commodities

Back into Positive Territory

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Brent crude oil - Investors King
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By Craig Erlam, Senior Market Analyst, UK & EMEA, OANDA

Stock markets are off to a positive start to the week in Europe and the US, in keeping with the price action we’ve seen over the last week since the new variant discovery.

Reports of the Omicron symptoms being less severe are boosting risk appetite but it’s too soon to get carried away. For one, we’ve seen this repeatedly since the initial news broke a little over a week ago. Markets have been very headline-driven and this is just the latest rally on the back of some positive reports.

While this may be the first in a slew of positive data around the new variant, it could also be the anomaly and what follows could explain why world leaders and various agencies have been so anxious. Let’s hope for the former but I expect extreme caution to remain until the data gives us cause for more optimism.

Weeks like this, the economic data would always play second fiddle but as it turns out, it’s looking a little thin on that front and central banks are in the same position as the rest of us. So the rest of the week will remain very Omicron headline-driven which will likely mean plenty more volatility.

By then, we may know a lot more which means the conversation can move on to the monetary response. Unfortunately, that comes too late for the RBA and BoC tomorrow and Wednesday, respectively, and perhaps just in time for the Fed, ECB, and BoE next week. If the news isn’t good on the variant then central banks are going to find themselves in an awful position, which could rock the boat somewhat.

Oil rebounds as Saudi Arabia boosts prices

Oil prices are bouncing back on Monday, up more than 2% after coming under significant stress last week. Reports of Saudi Arabia raising crude prices are apparently behind the move, although I’m not entirely convinced. Sure, it portrays confidence in the markets but it doesn’t alter the uncertain outlook in any way. I think it’s probably just a risk rebound as we’re seeing elsewhere.

Ultimately, the most bullish thing for prices is that Omicron is reportedly less severe and if more good news follows, we can all relax a little and the downside risks to the economy will abate. If the good news doesn’t follow, OPEC+ will pare back output and support prices that way. The question is how much the lows will be tested in the interim, if at all. Producers’ resolve has been tested before on many occasions.

Gold remains under pressure as USD creeps higher

Gold remains under pressure, as US yields at the shorter end of the curve and the dollar continue to creep higher. As is the case with every other asset class, the yellow metal will remain extremely sensitive to developments over the next couple of weeks as we learn how great a threat Omicron will pose and what the monetary response will be.

It’s found some support around $1,760 late last week where it has repeatedly done so since the middle of October. A move below here could see focus shift back towards $1,720 and then $1,680 which would be around the lows for this year.

Bitcoin partly recovers after crash

Bitcoin has had an eventful few days, having been pummelled on Saturday before recouping much of those losses. Whatever the cause of the flash crash, it hasn’t managed to fully reverse the losses and remains below $50,000. That could leave it vulnerable in the near term, especially with it struggling to track other risk instruments higher on the day. Bad news on Omicron could really put it under pressure.

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Why the Price of Cooking Gas is Increasing

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cooking gas cylinder

For some time now there has been a continual surge in the price of Liquefied Petroleum Gas (LPG) popularly known as cooking gas in Nigeria. Across the country, LPG has recorded an unprecedented increase in price by about 240 percent.

Data obtained from the website of the National Bureau of Statistics (NBS) shows that in August, the average price for refilling a 5kg gas cylinder for LPG was N2,215. It rose to N2,397 in September. The price of refilling 12.5kg cylinder also increased from N4,514 in August to N6,164 in September.

The data also showed variation in the prices of the commodity in different states. The data revealed that Cross Rivers ad and Anambra selling 12.5kg at N6,897 and N6,779 respectively were the two states with the highest average price for September.

The two states with the lowest average price for September are Borno and Osun states, the product sold at N5,100 and N5,006, respectively. A visit to a few LPG stations on Tuesday in Ibadan, Oyo state capital reveals that the prices of LPG goes for between N3,050 and N3,200 for 5kg. For 12kg, it ranges between N7,150 to N7,300.

Available information has therefore revealed that the surge in price is a result of the fact that importers of the product have stopped importing it.

According to the Executive Secretary of Nigeria Association of Liquefied Petroleum gas Marketers, Mr Essien, importers stopped importing the commodity because of the introduction of custom duty and the value-added tax now imposed on imported LPG. He claimed that there are other issues and that as long as the marketers are not importing the commodity, local supply will continue to suffer a severe drop.

It is to be noted that over 60 percent of LPG used in the country is imported, less than 40 percent is locally produced. Therefore a halt in import implies that the country is left with less than 40 percent produced locally.

The NLNG supplies LPG to terminals and these terminals sell to the marketers and at times in a day the price can go up by about three times. NLNG is now selling in the region of N11m per 20 metric tones truck with a cumulative daily increase of N300,000 to N500,000 without the imposition of VAT and custom duties,” he said in an interview with Punch.

NLNG stands for Nigeria Liquefied and Natural Gas. It is an independent incorporated joint venture that harnesses Nigeria’s vast Natural Gas (LNG) and Natural gas Liquids (NGLs) for export. Last week’s Tuesday, the company announced that it had decided to cut cooking gas exports to meet domestic demand. Despite this, the price of LNG has continued to increase.

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Commodity Markets to Remain Volatile – Economic Commission for Africa

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Commodities Exchange

Commodity markets in Africa are expected to remain volatile in the coming months following the persistence of Covid-19 constrains in the supply chain and other global economic pressures, says Stephen Karingi, Director of Regional Integration and Trade Division at the Economic Commission for Africa (ECA).

Mr Karingi was speaking at the ECA Price Watch session with African finance ministers on ‘Commodity prices amid COVID-19: prospects and policy implications for African economies.’ This is the 5th in the series of presentation sessions of price development in a specific sector compiled and disseminated by the ECA Price Watch Centre for Africa.

He said that African economies remain largely dependent on primary commodities exports and that although the commodity sector in most African economies is a significant source of national revenues, high dependence on the sector means high vulnerability to the vagaries of international markets and volatile prices passed on to local markets.

“High commodity dependence is associated with lower human development indicator across the developing world,” said Mr Karingi, adding “limited diversification and reliance on commodities sector are detrimental to long-term development in resource-rich countries.”

The ECA director noted that the commodities markets in Africa reacted strongly to COVID-19 in early 2020, owing to restrictions, economic slowdown and uncertain outlook. From mid-2020, significant rebound in commodities prices were above their pre COVID-19 levels with short term volatilities partly supported by expansive macroeconomic policies

On the commodity markets outlook, he said the upside risk factors for the continent include improved economic outlook/gradual recovery partly driven by successful vaccines campaigns and control of COVID-19 outbreaks; expansive monetary and fiscal policies to sustain economic activities like the recent $ 1.9 Trillion rescue Plan in the US and the € 750 Billion recovery effort in the EU area ; dynamic construction and infrastructure sectors worldwide to support markets of some commodities; high production costs to put upward pressure on food costs; low carbon energy and electric vehicles to sustain markets for products such as cobalt, lithium and nickel.

The downside risk factors include the gloomy economic prospects, especially in industrialized economies if the new COVID-19 variant is not controlled; and slower growth in major commodity importing countries.

According to Mr Karingi the potential impacts of recent surge in commodities prices will see commodity exporters record increases in economic outputs and fiscal revenues; price volatility to result in macroeconomic instability, trade balances, investment flows; and potential negative weight of high prices on net commodities importers, especially with regards to food and energy commodities.

He recommended that countries should have an overhaul policy -fiscal, trade, human capital – to reduce strong dependence to global commodity markets. African countries should also promote economic and fiscal diversification, including through the landmark African Continental Free Trade Area (AfCFTA)

“AfCFTA will assist with Covid-19 recovery but expected benefits from AfCFTA will not be automatic. Member states must pursue ratification of the Agreement and implement it effectively,” he noted.

Oliver Chinganya, Director of the African Centre for Statistics (ACS) at the ECA, said while the macroeconomic effects are well known, the trends of commodity prices and their influence on the revenue of African countries require delving into deeper analysis to have good grasp of the situation.

“The recent commodity price movement raises questions on critical points that economic policies should consider both in the current situation as well as for longer term perspectives,” he said.

Mr Chinganya observed that over the last twenty months COVID-19, has exposed the vulnerability of African economies to global shocks and high dependence to remote world markets. This has led to disruptions in supply chains and slowdown in economic activities worldwide, which to some extent have affected the price of several commodities since the outbreak.

The last ECA Price Watch Centre presentation was held on June 22 and focused on Energy Prices in Africa: Transition Towards Clean Energy for Africa’s Industrialization.

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