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Soya beans and oil – short sell oil

Soya beans and soya meal have both traded higher on the weather effects of the current El Nino on the prospect for crops in the Southern Hemisphere. Extra demand for soya in recent years has come from the increased consumer appetite for meat in emerging economies (soya meal is fed to cattle)  so the underlying situation is one of healthy demand meeting slightly uncertain supply, hence higher prices.

The source of this demand has had the odd effect of relegating the other main soya product (soya oil) almost to the status of a by-product. As a result, when it comes time to sell any of these soya contracts, we usually suggest choosing oil. So it is here. The Soya bean and soya meal contracts  (not shown) have just reached new highs, extending as they go. Soya oil in contrast has made hardly any headway, so we advise selling it short hereabouts, despite the fact that there is no specific signal in that commodity. It is also possible to sell short soya beans but we think using soya oil as a substitute instrument is less risky:

Soya and soya oil