Global Commodity Outlook

After gaining momentum earlier in the year 2018, most agricultural commodity prices weakened significantly in the third quarter of 2018. This was mostly in response to upward revisions to production estimates for key crops and, to a lesser extent, currency depreciations among some commodity exporters. Oils suffered the largest losses following China’s 25 percent tariff on U.S. soybeans. On average, the Agricultural Price Index was expected to be roughly unchanged in 2018 compared to 2017, and to rise by just under 2 percent in 2019, mainly owing to higher costs of energy and fertilizers. According to the U.S. Department of Agriculture’s (USDA)(October 2018), global supplies of wheat, maize, and rice were projected to reach a combined 2,906 million metric tons (mmt) this season (September 2018 to August 2019), nearly identical to last season.

Grain prices :

The Grain Price Index is projected to edge up 1 percent in 2019 after an estimated 10 percent rise in 2018 resulting from a drought in Europe and Central Asia that affected wheat prices.


Global production of wheat is projected to be 4 percent lower than last season’s record of 759 mmt, according to the USDA. Yields have been adversely affected by heat waves in key producing countries of Eastern Europe and Central Asia. Global consumption of wheat is expected to grow by less than 1 percent from last season, pushing the stocks-to-use ratio (an approximate measure of supply relative to demand) down by 2 percentage points, still the second highest level of the past two decades.


Rice production is projected to decline marginally in 2018-19 to 488 mmt in line with earlier assessments. Growing conditions have been mixed: delays in Vietnam’s harvest due to late plantings and reduced yields in Thailand due to heavy rains have been offset by favorable conditions in China, India, and Indonesia. Global consumption of rice is expected to increase marginally, leaving the stocks-to-use ratio largely unchanged at 30 percent.


Global maize production is expected to fall more than 3 percent this season, to 1,043 mmt. Crop conditions in the Southern Hemisphere are mixed—Brazil’s harvest is expected to be near its five-year average; but weather conditions in Argentina have been unfavorable notwithstanding some recent improvement. Despite a promising start in maize sowing in the Northern Hemisphere (United States, Mexico, and China), the USDA’s prospective plantings report points to a 2 percent decline in land allocated to maize for the next season. South Africa may also experience a decline in maize plantings. Global maize consumption is anticipated to expand nearly 3 percent, reducing the stocksto-use ratio to 18.6 percent, nearly 4 percentage points below last season but much higher than the lows in 2010-12.


Global output of the 17 major edible oils (including palm, soybean, and rapeseed) is forecast to increase 3 percent in the 2018-19. The World Bank’s Oils and Meals Price Index fell almost 11 percent in the third quarter of 2018 (q/q), and stands 3 percent lower than the same quarter of last year. The weakness reflects favorable crop conditions across-the-board and, in the case of soybeans, trade policies. Prices for soybean meal and coconut oil each plunged 13 percent in the quarter, followed by palm oil (down 11 percent) and soybean oil (down 8 percent). The production outlook for the current season (October 2018-September 2019) looks promising in view of continuing favorable growing conditions.

Oils and Seeds:

Production of oilseeds in 2018-19 is also expected to be healthy, with global supplies of the ten major oilseeds projected to reach 590 mmt, up from last season’s 564 mmt. Almost all of this growth is expected from soybeans, mostly from Argentina, and less so in Brazil and the United States.

Coffee and Tea:

Global coffee production is projected to increase 7 percent in 2018-19.A modest recovery is expected in 2019. Despite the recent price weakness, cocoa prices are expected to gain 2 percent in 2019, following a projected increase of 13 percent in 2018, as consumption is expected to outpace production in both years. Global tea prices declined more than 5 percent in the third quarter of 2018 (q/q). Tea prices are expected to gain 1 percent in 2019, following a projected decline of 9 percent in 2018.


Although global cotton production outpaced consumption by a small margin in 2017-18, production next season is projected to decline by 4 percent, creating room for the unwinding of China’s stocks. Cotton prices are expected to remain nearly flat in 2019, following a projected gain of 11 percent in 2018.


The World Bank’s Beverage Price Index declined almost 9 percent in the third quarter (q/q), with roughly similar losses across all of its components, following upward revisions to global supplies in all three markets. The Index was projected to decline more than 5 percent in 2018, before stabilizing in 2019.


Fertilizer prices are projected to rise 2 percent in 2019 due to modest global demand growth. Energy and fertilizer prices are expected to rise marginally in 2019 (1 and 2 percent, respectively) and, as noted in the energy section, upside risks to the forecast are elevated, especially for crude oil. Higher-thanexpected energy prices could exert upward pressure on grain and oilseed prices.

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