Close Navigation
Learn more about IBKR accounts
A Connection Between Commodities

A Connection Between Commodities

Posted April 12, 2023
Erik Norland
CME Group

AT A GLANCE

  • Gasoline and diesel are more relevant points of comparison for agriculture prices than crude oil itself
  • A shortage of refined products may explain why corn, wheat and soybean prices haven’t fallen in line with crude oil

It’s been clear for many decades that crop prices are heavily influenced by the price of energy. But which energy product is the best one to look at?

Click Here To Watch Video

The temptation is to start with crude oil. Indeed, for much of the past two decades, the prices of corn, wheat and soybeans have been closely linked to the price of West Texas Intermediate (WTI) Crude Oil. When WTI prices are high, crops prices tend to be high, and vice versa.

WTI Crude Oil and wheat and corn

However, crop prices seem to be even more closely linked to the prices of gasoline and diesel than they are to crude oil itself. This makes sense because farmers don’t farm with crude oil. They plow their fields, harvest their crops and transport them to market with machinery that is powered by gasoline or diesel engines, making these more relevant points of comparison for agriculture prices.

Ultralow Sulfur Diesel

The output side is important as well. Ethanol from corn gets added to many gasoline blends, whereas soybean oil can be added principally to diesel fuels. 

So what’s happening with the oil product markets? Well, crude oil prices have been falling, but diesel and gasoline prices have remained high amid a shortage of refined products. This may explain why corn, wheat and soybean prices haven’t fallen in line with crude oil.  

Originally Posted April 10, 2023 – A Connection Between Commodities

Disclosure: Interactive Brokers

Information posted on IBKR Campus that is provided by third-parties does NOT constitute a recommendation that you should contract for the services of that third party. Third-party participants who contribute to IBKR Campus are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.

This material is from CME Group and is being posted with its permission. The views expressed in this material are solely those of the author and/or CME Group and Interactive Brokers is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to buy or sell any security. It should not be construed as research or investment advice or a recommendation to buy, sell or hold any security or commodity. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

Disclosure: Futures Trading

Futures are not suitable for all investors. The amount you may lose may be greater than your initial investment. Before trading futures, please read the CFTC Risk Disclosure. A copy and additional information are available at ibkr.com.

IBKR Campus Newsletters

This website uses cookies to collect usage information in order to offer a better browsing experience. By browsing this site or by clicking on the "ACCEPT COOKIES" button you accept our Cookie Policy.