PALM OIL ‘70s repeat

February 21st, 2021
1 minute read

That 70s show
  • Last week we wrote about the rising US bond yields & our suggestion that inflation (in USD) will rise much faster than is currently expected.
  • There are many reasons for thinking this... but our very simple explanation was based on the similarity of the chart movements.
  • Here’s another more specific example, the three year growth of the palm oil price.

USD1,000
  • One of my favorite pop quiz questions to investors has been ‘when did the palm oil price first get close to USD1,000?’
  • Most think it was in 2008, while in fact it was much earlier than that, in 1984.
  • But most of the big move took place in the 1970s & the palm oil price was already USD840 in 1974.
Pattern then
  • In November 1969, the palm oil price was only USD203 & the three year change, -10%.
  • 3 years later in December 1972 the price was back to just above USD200 & the three year change was negative -16%.
  • Suddenly the price took off & by October 1974, just two years later, the price was USD840, +231% from three years earlier.

Pattern now
  • Fast forward to early 2017... palm oil was then USD641, but that was down from there years before, -26%.
  • Three years later in early 2020, the price was even lower at USD550 & once again the three year change was negative -15%.
  • Now suddenly in early 2021, the price has jumped to just under USD1,000, the three years change, +49%.

USD1,740
  • Like the patterns of US dollar inflation in the 1970s & now, the palm oil price change is following too.
  • At this rate, the peak three years change would come in February 2022, just a year from now.
  • If it’s the same 231% three year change that would mean the palm oil price rising to USD1,720... in 12 months time.