Global Commodity Outlook

Most agricultural commodity prices rose moderately in the first quarter of 2019, following considerable declines during the second half of last year. The World Bank’s Agriculture Price Index increased 0.9 percent in the quarter (q/q), as a 3.4 percent decline in beverages was balanced by moderate gains in all other categories. The index was still 5.6 percent lower than a year ago. Most of the factors that depressed prices last year have moderated, including easing of trade tensions and lower prospective plantings in the U.S. for next season’s crop. The index is expected to decline 2.6 percent in 2019 and increase 1.7 percent in 2020 due to lower production and higher fertilizer prices. Downside risks to the forecast emanate primarily from an escalation of trade tensions. On the upside, higher energy prices could lift the cost of energy-intensive crops, notably grains and oilseeds. Higher-than-projected demand for biofuels could also induce higher prices for some commodities.

Grain prices :

The World Bank’s Grain Price Index gained nearly 2 percent in the first quarter of 2019 (q/q), and is more than 1 percent higher than a year ago Production estimates for 2018-19 have been revised upward throughout the season. According to the U.S. Department of Agriculture’s (USDA) latest assessment (April 2019), global supplies of the three main grains (wheat, maize, and rice) are projected to reach 3,126 million metric tons (mmt) this season (September 2018 to August 2019), nearly 1 percent higher than last season’s supplies.


Wheat prices, which gained 1 percent in the first quarter, are more than 10 percent higher than a year ago. Global wheat supplies tightened considerably this season, with production projected to be 4 percent lower compared to last season’s record of 763 mmt, according to the USDA. The decline—though less severe than originally estimated—is due to weather-related yield losses in key Eastern European and Central Asian producers. Global consumption of wheat is expected to decline marginally from last season, pushing the stocks-to-use ratio—a measure of supply availability relative to demand—down by 1 percentage point, but still the second highest ratio of the past two decades.


Rice prices have been remarkably stable during the past three quarters, fluctuating between $400/mt and $410/mt, after plunging nearly 12 percent from May to July last year. Weather-related disruptions in Brazil and the Philippines have been offset by favorable conditions in most Asian rice producers, including India, Indonesia, Thailand, and Vietnam. Global rice production is projected to increase marginally in 2018-19 to 501 mmt, a slightly more optimistic outcome than earlier assessments. Global consumption is projected to increase by about 1 percent, resulting in a stock-to-use ratio of 35 percent, a 20-year high.


Maize prices rose 3 percent in the first quarter, following a 3 percent increase in Q4. The global maize crop for 2018-19, which has been revised gradually upward throughout the season, is projected to be almost 3 percent higher than 2017-18, according to the USDA, as lower output from the United States, the world’s top producer, will be more than offset by larger-than-expected crops from other key producers, including Argentina, the European Union, and Ukraine. Consumption of maize is projected to increase more than 3 percent, pushing the stocks-to-use ratio to 27.4 percent, a 5-year low. Such a low stock-to-use ratio would typically be cause for alarm, however ample supplies of other grains and oilseeds help provide a buffer.


The edible oil production outlook for the current season (ending September 2019) continues to look promising due to favorable growing conditions. Global output of the 17 major edible oils (including palm, soybean, and rapeseed, which together account for two-thirds of global output) is forecast to increase 2 percent in the 2018-19 season. More than two-thirds of the production gains are projected to come from palm oil. Indonesia and Malaysia are the primary producers of palm oil, and both are experiencing favorable weather conditions. Most of the remaining growth is expected from sunflower oil, due to good growing conditions in Ukraine and Russia, which together account for half of global output.

Oils and Seeds:

Global oilseed output for 2018-19 is also projected to rise, with supplies of the 10 major oilseeds projected to reach 578 mmt, up from last season’s 566 mmt. All of the growth is expected to come from soybeans, mostly from Argentina and, to a lesser extent, the United States.


Cotton prices declined nearly 5 percent in the first quarter and stand almost 9 percent lower than a year ago. The weakness reflects estimates that production will outpace consumption next season (2019-20), the first time since 2015-16. Production is expected to reach 27.6 mmt in 2019-20, with increases in most major producing countries including the United States, China, India, Pakistan, and several West African countries. Consumption, on the other hand, is estimated at 27.3 mmt, suggesting global stocks will increase by almost 2 mmt. Following a projected decline of almost 7 percent in 2019, cotton prices are expected to experience a 1 percent increase in 2020.


The World Bank’s Beverage Price Index declined more than 3 percent in 2019 Q1 (q/q), down 7 percent from a year ago, with coffee (Arabica and Robusta) and tea all experiencing significant price drops. The index is projected to decline almost 3 percent in 2019 before a modest recovery in 2020. Tea prices, especially Kolkata and Mombasa, plunged 23 and 7 percent, respectively, in the first quarter (q/q), and stand 7 and 25 percent lower than a year ago. The Kolkata auction dropped to an 11-year low. Large tea crops due to favorable weather conditions in East Africa (especially Kenya) and India have caused the price collapse. In response, the Indian Tea Board ordered a suspension of tea production in December. Tea prices (3-auction average) are expected to decline 14 percent in 2019, before making marginal gains in 2010.

Source: Source: Commodity Markets Outlook : A World Bank Quarterly Report