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Risk of tighter agricultural export restrictions growing

The recent tightening of export restrictions has been limiting the supply of staple agricultural commodities available to global markets and pushing up prices. In light of the ban on wheat exports from India, we’ve raised our forecast for the price of wheat from 800 US cents per bushel to 900 by end-2022.
Olivia Cross Assistant Economist
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Commodities Update

The outlook for staple agricultural commodities

We think the prices of agricultural commodities will fall back in the coming months, but most will remain historically high owing to tight supply, concerns about future supply and high energy prices.

24 June 2022

Commodities Weekly Wrap

Non-energy prices only have so much more to fall

Most commodity prices fell this week as demand concerns picked up due to ongoing monetary policy tightening by major central banks. Speaking to the US Senate Banking Committee on Wednesday, Federal Reserve Chair Jerome Powell underlined his “strong commitment” to bringing current multi-decade high inflation back to target. A notable exception to this trend, however, was a rise in natural gas prices in Europe and Asia owing to fears that Russia could potentially further cut gas supply to Europe. If demand concerns intensify, further falls in commodity prices could be in store. However, we don’t think there is a great deal of room for prices to fall in the near term for a couple of reasons. First, energy prices will remain historically high due to supply constraints, putting a floor under other commodity prices. Second, stocks of many commodities, particularly industrial metals, are low, which will further underpin prices. And finally, China’s economy should recover somewhat in the second half of this year. Looking ahead, G7 leaders begin a three-day meeting on Sunday, during which they will discuss sanctions against Russia and how to support the long-term reconstruction of Ukraine. Any new sanctions coming out of that meeting could affect commodity prices. Data-wise, the EIA should get back to releasing weekly oil inventory data next Wednesday, after missing this week’s release due to technical reasons.

24 June 2022

Commodities Weekly Wrap

Supply concerns to dominate in gas markets

European natural gas prices surged this week on renewed supply concerns, as Russia once again cut gas supplies to Europe and the US Freeport LNG export facility closed for six months. The huge price move emphasises how volatile natural gas prices can be, particularly in the current environment when global supplies are tight. High volatility is likely to persist as news on gas flows develops but we’re forecasting the European natural gas price to remain high, ending the year at €120 per MWh. Meanwhile, the financial market backdrop has become less favourable for commodity prices. Global monetary tightening and concerns about global growth have hit risky assets like equities and non-energy commodities this week. Genuine supply concerns are keeping prices of certain commodities elevated, but there is the potential for large price falls if some of these fears ease or prove unfounded. Next week, we don’t think there is much chance of a cut to China’s Loan Prime Rate, to be announced on Monday and the published agenda for the National People’s Congress Standing Committee doesn’t indicate that any extra financing for fiscal support will be discussed. Without significant stimulus, we think that soft demand from China will weigh on industrial metals prices this year.

17 June 2022

More from Olivia Cross

Commodities Update

Not just Indonesia export ban boosting palm oil prices

We expect Indonesia’s latest ban on palm oil exports to be short-lived, but constrained supply and the high prices of other edible oils, coupled with elevated oil prices, will support the price of palm oil. We’ve revised up our palm oil price forecast to MYR 5,000 per tonne (MYR 4,025 previously) at end-2022.

5 May 2022

Commodities Update

Softer housing demand to bring down US lumber price

A cooling US housing market will weigh on lumber prices, despite disruption to imports from Canada. We expect the lumber price to continue its downward trend, but to remain well above its 10-year average.

21 April 2022

Commodities Watch

Grain prices to stay historically high

Grains prices have skyrocketed since the Russian invasion of Ukraine as fears of supply disruption have intensified and energy costs, which feed into agricultural production costs, have soared. In this Commodities Watch, we consider the impact the war could have on the grain market and prices in 2022.

31 March 2022
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