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World Bank report highlights shift in vegoil/gasoil dynamic

Gasoil and bean oil futures both dropped on Thursday, leaving the BOGO spread broadly steady in the mid-$180s/t this morning. An updated forecast from the world bank this week highlighted the relative rise in vegetable oil prices relative to mineral oil which has dragged BOGO spreads some $300/t higher relative to last summer’s levels.

Despite an upgrade to its 2015 crude oil price prediction relative to April, World bank still expects global energy prices to fall nearly 39% through the end of this year relative to 2014, with oilseed and meal prices down closer to 18% YoY. World Bank sees little prospect of El Nino disrupting agricultural production and hampering rising stock to use ratios this year, leaving agricultural price risk to the downside given limited risk of political intervention in international trade and falling farm input costs.

Low oil prices meanwhile are reducing pressure to substitute into renewables, which will limit growth in crop diversion to energy to 2% in 2016 and beyond.


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