An announcement this week from the Food & Drug Administration outlined a proposal to ban partially hydrogenated oils, citing health risks due to the presence of trans fats.
Ironically, partially hydrogenated oils were once celebrated as a healthier alternative to lard and butter, and were commonplace in deep fryers, margarine and processed foods. Over the last decade, research on heart disease and subsequent public outcry has resulted in around 80% of the food industry moving away from trans fats already. The FDA ban, expected to be implemented in 2015, would finish that transition.
This could affect commodities markets, especially soybean oil, which is a dominant source of artificially produced trans fats. Over fifteen percent of domestic soybean oil is used to make partially hydrogenated oils, and Thursday's announcement caused a sharp sell-off in Chicago's soybean oil market. By the end of the week, soybean oil had lost over 1.5 cents per pound, trading Friday for 40.07.
Europe Ailing, Cuts Interest Rates
Though the recession in Europe has officially ended, the continent's economies are still struggling with low economic growth. One sign of this are near-stagnant prices, which can cripple consumer spending and investment as people wait for lower prices in the future instead of buying today. To combat this phenomenon, known as deflation, the European Central Bank (ECB) announced Thursday that it was cutting interest rates to 0.25%, the lowest level in ECB history.
This move, intended to stimulate the economy by lowering borrowing costs, hurt investor confidence in Europe, sending European stocks and the Eurocurrency lower. In the aftermath of the decision, the euro fell near a two month low, trading Friday near $1.33.
Meanwhile, the US economy continues growing, gaining over 200,000 new jobs during October. Other economic indicators like personal income and factory orders are showing signs of strength, which has prompted some economists to call for the US to ease back from its unprecedented stimulus program.
For now, the United States, European Union, and Japan have interest rates near zero percent, making it cheap to borrow and giving little incentive to save.
USDA Boosts Corn
The USDA released its monthly Crop Production and Supply & Demand reports midday Friday, the first since the government shutdown. The report cut expected corn acreage to a total of 87.2 million acres, while projecting increased demand for the grain. This helped rally corn off of three-year lows, trading midday near $4.25 per bushel.