Vegetableoils have been used for a long time now for various purposes. Most ofthe time, these oils are consumed directly or indirectly in food,serving the same purpose as the animal fats. They are used inpastries, improving the texture of food and for flavor. Thiscommodity is widely and commonly utilized in the day to day cookingand other related culinary activities. Among the variety of vegetableoils that exist, soybean oil has been extensively used in cooking andother industries such as painting, where it is used as a drying oil[ CITATION Mar151 l 1033 ].
Thedemand for vegetable oils and more so soybean oil has largelyincreased over the years mainly due to the high consumption levelsexperienced not only in the United States but also in the whole worldin general. This can be attributed to the health effects associatedwith soybean as well as the pricing. In other regions whereproduction losses for other vegetable oils have occurred, the demandfor soybean subsequently increased to compensate for such losses [ CITATION Cra15 l 1033 ].On top of that, the relative availability and abundance of this oilsupported by its price premium leans towards supporting demand in theworldwide market. Additionally, favorable policies that allow forboth the import and export of this product widens the market thusleading to higher levels of demand[ CITATION Dar08 l 1033 ].
Thesupply of Soybean oil is dependent upon many factors and one of themajor factors is competition from other oil alternatives. The needfor certain types of vegetable oils may have an effect on the supplyof soybean. For instance, in regions where palm oil or corn oil arehighly preferred, then the amount of soybean oil will most likelydecrease. Climate also plays an important role since favorableconditions directly translate to high yields that can satisfy themarket demands. On the contrary, unfavorable weather conditions arelikely to cause losses in the yields thus diminishing the supply.Soybean is not only used in food industries alone and therefore, asthe market widens, but there will be a tendency to increase theproduction [ CITATION Cra15 l 1033 ].Also, the contemporary market prices play a vital part by encouragingproduction, exportation or importation of this commodity to placeswhere demand is high.
Changesin supply and demand have led to a state where the price of thisproduct doesn’t remain constant for an extended period. Thevariations have led to price fluctuations based on the fact that asthe supply increases, then the prices consequently decrease. Lessproduction, on the other hand, leads to a significant rise in theprice. Also, achieving a price equilibrium is affected by otherfactors such as the crude oil prices due to the profitability ofbiofuel production and likewise the dollar value which affectsexports [ CITATION Shr16 l 1033 ].
Itis expected that there will be outstanding variations in the supplyand demand of soybean oil. This can be attributed to the alterationsin climatic conditions which hint to diminished production as well asdriving the growing of separate crops that perform better [ CITATION Cra15 l 1033 ].Other factors affect the amount and availability in the short termfor instance a rise in the value of the dollar may be detrimental toimporters who have to pay a higher price. In this respect, a drop inthe monetary value is considered favorable for soybeantrade. Currently, the high output in the United States and Argentinahas caused downward pressure on the price. Lastly, as the world’soil supply continues growing tighter, the shortage of vegetable oilsis most likely to be frequent thus affecting the supply, demand, andthe prices [ CITATION Shr16 l 1033 ].
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Coles, M. (2015, June 24). The Economics of Soybean. Retrieved from The Market Mogul: http://themarketmogul.com/economics-soybean/
Good, D. (2008, September 22). Many Factors Influencing Corn and Soybean Prices. Retrieved from FarmDoc: http://www.farmdoc.illinois.edu/marketing/weekly/html/092208.html
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