Jul
25
How come when oil prices rise, the agriculture stocks tend to rise, why is this?
Michael V asked:
I noticed every time the price of oil rises, the agriculture stocks tend to go up in share price also. Does anyone know is this is the case, and if so, why?
I noticed every time the price of oil rises, the agriculture stocks tend to go up in share price also. Does anyone know is this is the case, and if so, why?
3 Comments
When the price of gasoline rises it makes biofuel (ethanol, biodiesel) more attractive. They are made from (so increase demand for) corn, soybeans, canola, sugar cane, etc.
I would suspect you are looking at large Agri-businesses with a substantial interest in bio-fuels, most particularly corn. Here in the USA we currently have major subsidies available to businesses working in the bio-fuel category, so it makes it very economical for these large Agri-business concerns to work on developing the bio-fuel part of their businesses. And as fuel prices driven by oil rise, so do the prices for corn and its resultant bio-fuel.
I tink its because the rise in the price of oil results in the rise of gasoline which is needed for to farmers to operate their machinery . It also hapens as a result of suppliers to them using the gasoline so te charge more for their products. When all this happens farmers raise their prices to cut costs in their expencs.