Global Commodity Outlook


Prices for most industrial commodities strengthened in the first quarter of 2017, while agricultural prices remained broadly stable. Agricultural commodity prices, which gained 1 percent in the first quarter, are anticipated to remain broadly stable in 2017, with moderate increases in oils and meals and raw materials balanced by declines in grains and beverages. The Agricultural Price Index is expected to remain steady in 2017, with some variation among individual commodities. Grain prices are projected to fall 3 percent, unchanged from the January projection. However, oils and meal prices are expected to rise more than 2 percent, adding to last year’s 5 percent increase. Beverage prices are forecast to drop more than 6 percent, a large revision from the projected 1 percent decline in January. Raw materials are projected to gain 4 percent, after a decline by the same amount last year.

Food Grain


Food commodity prices are expected to increase through 2020 with food and raw material prices rising more than beverages prices. Grain prices increased 4 percent in the first quarter, but stand at just half their late-2012 peak. The 2017 price uptick reflects shortfalls of maize and wheat output.

Wheat


Global production of wheat is expected to reach a new record high of 751 million metric tons (mmt). Conditions for the global wheat crop are generally favorable in most key producing and exporting areas, including Australia, the European Union, the Russian Federation, and Ukraine. Looking ahead, preliminary estimates for the upcoming 2017-18 season point to a lower global wheat crop in major producing countries, including Canada and the United States, where planted area is down.

Rice


Rice production is expected to increase by more than 5 percent in 2016-17, driven by favorable crop conditions in Southeast Asia, including in Indonesia, Thailand (the world’s top rice exporter), and the Philippines. Given that consumption is expected to increase by 4 percent, the stocks-to-use ratio will reach a 15-year high, as in the cases of wheat and maize, according to the USDA. The early FAO-AMIS assessment for 2017-18 indicates a favorable rice crop, and global production and consumption are expected to increase by about 1 percent each.

Maize:


Production of maize, which has been consistently revised upward throughout the current crop season, is projected to increase nearly 10 percent in 2016-17 on favorable crop conditions in most key suppliers, including Argentina, Canada, South Africa, Ukraine, and the United States. The stocks-to-use ratio at the end of the season is expected to reach 22 percent, a 16-year high. Preliminary estimates by FAO-AMIS tentatively put next season’s crop at 1 percent above this season’s, as large harvests in Argentina, Brazil, and South Africa more than offset a much smaller crop in the United States.

Edible oil:


This season’s outlook for edible oils also remains favorable. Global production of the 17 most consumed edible oils is expected to reach 214 mmt in 2016-17, a 6 percent increase. More than half of the growth is projected to come from palm oil (produced equally in Indonesia and Malaysia) and soybean oil. Production of palm oil declined by the greatest amount on record in 2016-17. The oilseed supply outlook during the current season is also healthy, with global supplies for the ten major oilseeds projected to reach a new high of 552 mmt, 41 mmt higher than the previous season. Most of the increase in supplies is projected to come from a robust soybean crop, which is expected to reach 343 mmt in 2016-17, more than 10 percent higher than last season. Brazil and the United States are the major contributors to the increase. According to preliminary estimates by the International Grains Council, next season’s soybean crop will be even higher.

Soybean oil:


A 3 percent increase in palm oil prices (due to supply tightness in Malaysia and Indonesia) was counterbalanced by a 5 percent drop in soybean oil prices (due to ample supplies in South America, notably Argentina and Brazil). This season’s outlook for edible oils also remains favorable. Following last year’s diminished crop due to El Niño, global production of the 17 most consumed edible oils is expected to reach 214 mmt in 2016-17, a 6 percent increase. More than half of the growth is projected to come from palm oil (produced equally in Indonesia and Malaysia) and soybean oil (due to a shortfall in South America). Production of palm oil declined by the greatest amount on record in 2016-17 due to El Niño.

Cotton:


Following years of relative stability around $1.60/kg, cotton prices rose 7 percent in 2017Q1, up 27 percent from a year ago. The strength reflects last season’s sharp drop in global production, from 26.2 mmt in 2014-15 to 21.0 mmt, most of which was accounted for by China. With consumption just above 24 mmt, the decline in production created a 3 mmt market deficit. The deficit was managed by China, drawing down its stocks from 12.9 mmt in 2014-15 to an estimated 7.5 mmt in the upcoming 2017-18 crop season. This managed stock draw created a stable price environment. Cotton prices are projected to increase 13 percent in 2017 on expected demand strengthening.

Beverages:
Coffee:


Beverages The World Bank’s Beverage Price Index declined by more than 6 percent in 2017Q1. The weakening in Arabica prices reflects a well-supplied market: global output increased 15 percent in the 12-month period to March 2017 due to Brazilian bumper crop supplemented by good crops in Colombia, Honduras, and Peru. The relative strength in Robusta prices reflects a shortfall in global output, due to declines in production in Brazil and Vietnam, the world’s key Robusta suppliers. A fairly balanced Arabica market implies no change in prices for 2017, but the deficit in Robusta is expected to raise prices by 13 percent. The plunge in cocoa prices to almost $2/kg in February 2017, down from $3/kg in the first half of 2016, marked the eighth straight monthly decline and a 10-year low. The weakness reflects a 15 percent increase in global cocoa supply to more than 4.5 million tons in 2016-17. Most of the world’s key suppliers contributed to the increase, including Côte d’Ivoire (up 26 percent), Nigeria (up 18 percent), and Ghana (up 8 percent). With the cocoa market well supplied, prices are projected to decline 25 percent in 2017 before increasing marginally in 2018.

Tea:


Global tea prices changed little in 2017Q1. However, prices were up 16 percent in Mombasa and 5 percent in Colombo due to a drought-induced production shortfall in East Africa and Sri Lanka as well as strong demand from Middle East countries. In contrast, tea prices plunged 23 percent at the Kolkata auction due to large stocks from last season, a good current year crop, and weak demand, the latter partly linked to the Indian government’s demonetization campaign in late 2016. Tea prices are expected to gain 6 percent in 2017 on expected market tightness.

Fertilizers:


Fertilizer prices rose 5 percent in the first quarter, up for the second straight quarter. Urea prices jumped 16 percent and DAP prices rose 9 percent on strong demand and tight supply. Partly offsetting these gains, phosphate rock prices dropped 7 percent as new capacity added to oversupply, while potash prices edged lower. Fertilizer markets continue to face relatively weak global demand due to low crop prices. Markets remain well supplied with adequate stocks and growing low-cost capacity.


Source: Commodity Market Outlook: A World Bank Quarterly Report, April 2017

http://pubdocs.worldbank.org/en/174381493046968144/CMO-April-2017-Full-Report.pdf