The winner is...?
April 18th, 2019
⏰ 1 minute read
⏰ 1 minute read
Yesterday
Yesterday’s market winner was... Palm oil. While we had a holiday in Jakarta for the election, the price in Malaysia was up 1.5% with the 3rd month futures back to RM2,200. But 1 day’s price isn’t much. How about 100 years? How about also comparing palm oil with other prices to see the ‘real price’?
100 years
To get the real price we compare with the consumer price index of average prices. As most commodities are priced in $s we can compare Palm oil in $s with US CPI. For 100 years we don’t have palm oil prices but we know (from Google) that over a century, food prices have fallen 80% in real terms, including palm oil.
50 years
How about 50 years ago? Yes we do have palm oil prices from the 1960s. In 1969 the palm oil price was about $180-$200. US CPI index was 36. Today CPI is 254 so average $ prices are up 7X. Palm oil is $530, up about 2.7X. That’s a real price drop of 60% or most of the 80% in 100 years. To follow CPI, price should be $1,300 now!
20 years
How about over the last 20 years? Let’s say from 2000. Palm oil prices move up & down a lot, but in early 2000 the price was $350. US CPI index was then 169. To today CPI is up 50%, but the palm oil price at yesterday’s close $536 is up 53%! For possibly the first time in a century & for almost 20 years, the real palm oil price is rising ❗️
Why?❓
This event has almost passed unnoticed, perhaps mainly because in nominal terms the palm oil price has fallen in recent years. But why is it happening? Price depends on supply & supply depends on yield & area. Yields haven’t changed for years & planting slowed from 2000 to almost 0 now. Real prices will likely rise more. Do you agree?
Sebastian
PS you can find palm oil price data back to 1960 in our data file here.
Yesterday’s market winner was... Palm oil. While we had a holiday in Jakarta for the election, the price in Malaysia was up 1.5% with the 3rd month futures back to RM2,200. But 1 day’s price isn’t much. How about 100 years? How about also comparing palm oil with other prices to see the ‘real price’?
100 years
To get the real price we compare with the consumer price index of average prices. As most commodities are priced in $s we can compare Palm oil in $s with US CPI. For 100 years we don’t have palm oil prices but we know (from Google) that over a century, food prices have fallen 80% in real terms, including palm oil.
50 years
How about 50 years ago? Yes we do have palm oil prices from the 1960s. In 1969 the palm oil price was about $180-$200. US CPI index was 36. Today CPI is 254 so average $ prices are up 7X. Palm oil is $530, up about 2.7X. That’s a real price drop of 60% or most of the 80% in 100 years. To follow CPI, price should be $1,300 now!
20 years
How about over the last 20 years? Let’s say from 2000. Palm oil prices move up & down a lot, but in early 2000 the price was $350. US CPI index was then 169. To today CPI is up 50%, but the palm oil price at yesterday’s close $536 is up 53%! For possibly the first time in a century & for almost 20 years, the real palm oil price is rising ❗️
Why?❓
This event has almost passed unnoticed, perhaps mainly because in nominal terms the palm oil price has fallen in recent years. But why is it happening? Price depends on supply & supply depends on yield & area. Yields haven’t changed for years & planting slowed from 2000 to almost 0 now. Real prices will likely rise more. Do you agree?
Sebastian
PS you can find palm oil price data back to 1960 in our data file here.