Crude sets price norms for US vegetable oils

06 September 2007 20:19  [Source: ICIS news]

By Judith Taylor

AUSTIN, Texas (ICIS news)--Crude oil prices in the $70s/bbl mean refined soybean oil prices in the 40s cents/lb are the "new normal", Henry Bryant of Texas A&M University said on Thursday.

"These are historical highs we are seeing in the soybean market today," Bryant said.

Speaking at the Biodiesel Coalition of Texas (BCOT), Bryant explained that vegetable oil energy values are calculated back from crude oil prices.

The consequence of this calculation is that vegetable oils used as biodiesel feedstock, such as refined soybean oil, will track the price of crude oil more closely as the biofuels' evolution in the US continues to spread, the speaker said.

He said the industry should not be surprised at the rising prices on soybean oil or other vegetable oils such as canola/rapeseed, cottonseed, and even sunflower that can be used for biodiesel production.

"With the expansion of production of renewables such as ethanol and biodiesel, the implication is that corn and soybean oil prices will be determined from the product's energy value as these increasingly become energy feedstocks," Bryant added.

On Thursday crude soybean oil September futures on the Chicago Board of Trade (CBOT) were trading between 37.10 cents/lb ($818/tonne) and 37.27 cents/lb, having last settled at 37.31 cents/lb.

Refined soybean oil used for biodiesel production is generally priced 4-5 cents/lb above crude, bringing current refined oil values in the range of about 41-42 cents/lb.

($1.00 = €0.73)

By: Judith Taylor
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