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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.
Olivia Cross Assistant Economist
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Commodities Weekly Wrap

Pressure from rising Treasury yields likely to resume

This week the prices of most commodities got a boost as investors pared back expectations for rate hikes in the US, following lower than expected inflation data. That said, we still expect a further small rise in the US 10-year Treasury yield by the end of the year, which could put renewed downward pressure on the prices of commodities, and particularly gold, in the coming months. Supply disruption caused by the war in Ukraine seems to be easing, as grain ships have continued to leave Ukrainian ports. Meanwhile, there were renewed efforts to revive the 2015 Iran nuclear deal. While there are still hurdles, if a deal were agreed, we would expect a rapid rise in Iranian oil output, which would weigh on oil prices. Next week, we’ll be paying close attention to the latest activity and spending data from China on Monday. We expect that the data will show that the post-lockdown recovery lost steam in July, alongside a renewed deterioration in the property sector, which could weigh on industrial metals prices next week.

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Commodities Update

Gloomy outlook for use of agriculturals in industry

Deteriorating global economic growth over the coming quarters will weigh on industrial demand for cotton, natural rubber and lumber. That said, high oil prices will offer some support to cotton and natural rubber prices, and our expectation for rate cuts in the US in late 2023 could boost the price of US lumber.

10 August 2022

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China’s copper imports are the only bright spot

Commodity import volumes remained lacklustre in July, consistent with subdued activity in heavy industry and construction. We think import growth should tick up in the coming months in response to higher infrastructure spending and a modest pick-up in activity. But renewed lockdowns pose a downside risk. Oil and the Gulf Drop-In (9th Aug): What’s the outlook for oil prices and what does that mean for Gulf economic outperformance? Join economists from our Commodities and Emerging Markets teams for this 20-minute briefing. Register now.

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More from Olivia Cross

Energy Data Response

US Weekly Petroleum Status Report

Commercial crude stocks rose again this week, following another unusually large release from the strategic reserve. Meanwhile, implied product demand fell back as petroleum product prices remain very high. We’re expecting demand to remain seasonally soft in the coming months.

15 June 2022

Commodities Update

Weak China demand won’t hold back oil prices

Despite a rise in May, China’s PMIs still point to weak Chinese demand, which will continue to weigh on industrial metals prices. However, the war in Ukraine will remain the bigger driver of energy prices.

1 June 2022

Commodities Watch

Lessons from the spike in agriculture prices in 2007-12

The last time the prices of agricultural commodities rose as sharply as they have done in recent months was in the run up to the Global Financial Crisis and in 2011-12. During these times fears of food shortages were intense and some governments responded with restrictions on the export of staple agricultural commodities. In this Commodities Watch, we look at the differences and similarities between soaring prices in 2007-12 and 2020-22 and discuss whether prices will go into freefall in the coming years as they did in 2013.

31 May 2022
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