Humble soyabean becomes a ‘widow-maker’ for agriculture traders
The humble soyabean is a leading contender for widow-maker commodity of the year in 2016.
The “widow maker” trade of the 2000s was natural gas, taking down big name investors and trading executives whose bets were on the wrong side of the market. This year, the oilseed’s volatile swings in price — the meal is used to feed pigs and poultry and its oil for cooking and biodiesel — has wrongfooted many traders and investors.
What should have been a relatively bearish yet stable market due to forecast bumper crops, instead had a roller-coaster ride, on bad weather in key producing countries and unexpectedly strong demand.
“It’s been a hard market,” says Kona Haque, head of research at agricultural commodity traders ED & F Man.
Wilmar, the Singapore based trading house, was among the first to reveal that it had become a casualty of the volatility, issuing a profit warning in July. In August, it announced that its oilseed and grains unit had losses of $344m in the second quarter, blaming the poor results on the “untimely purchases of soybeans in a highly volatile market”.
The agricultural ABCDs — Archer Daniels Midland, Bunge, Cargill and Louis Dreyfus Company — all announced that their soyabean trading or processing businesses had been affected by the volatility. Engelhart, the trader formerly owned by Brazilian bank BTG Pactual, also attributed part of its $225m loss in the third quarter to soyabean trades gone awry.
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