Global Commodity Outlook

The World Bank’s Agricultural Price Index gained 6 percent in 2020Q3 (q/q), reversing declines earlier in the year. Prices now stand 6 percent higher than a year ago. Most agricultural commodity prices are gaining momentum as end-2020 approaches, driven by supply shortfalls in some oils and meals, strong demand for raw materials, and a depreciation in the U.S. dollar. Concerns of weakening demand and trade restrictions due to COVID-19 have faded. Prices of oils and meals gained most in the quarter due to supply shortfalls, followed by beverages and raw materials. The grain component remained broadly stable. Following a projected increase of nearly 3 percent in 2020, the Agricultural Price Index is expected to gain an additional 1.4 percent in 2021—both upward revisions from the April forecast. Risks to the forecasts emanate from higher energy costs, biofuel policies, emerging La Niña conditions, and macroeconomic uncertainties.

Grain prices :

The World Bank’s Grain Price Index has been broadly stable since early 2020—down 1 percent in the quarter and up 1 percent from a year ago. According to the U.S. Department of Agriculture’s October assessment, global production of the three main grains—wheat, maize, and rice—is projected to increase more than 2 percent this season (September 2020 to August 2021). Consumption is set to grow by 1.6 percent, resulting in a marginal increase in stocks-to-use ratios (an approximate measure of supply relative to demand). These ratios remain at historically high levels for most food commodities, thus easing the risk of large price swings in the event of adverse weather conditions or other shocks.


Wheat prices gained momentum in 2020Q3, following declines earlier in the year, and are 5 percent higher than 2019Q3. Production estimates for the current season point to a new record, following upward crop revisions in Australia, the EU, and Russia, due to favorable growing conditions. Some weather problems, including drought in Ukraine and frost in Argentina, are not large enough to pose significant threats to the outlook. Global production of wheat is expected to reach 773 mmt (million metric tons) this season, more than 1 percent higher than last season’s crop. Global consumption is expected to grow slightly less than 1 percent, pushing the stocks-to-use ratio to 0.43, the highest level in over two decades


Rice prices spiked to a 7-year high in April but have since declined. They were down 6 percent in 2020Q3 compared to the previous quarter but remained 17 percent higher than a year ago. The earlier strength in prices followed supply concerns due to adverse weather from key East Asian producers, especially Thailand (world’s second largest exporter after India), along with policy announcements including export restrictions. However, growing conditions in key producing countries (including India) improved, while many export restrictions never came into effect. Global rice production and consumption are projected to grow by a modest 1 percent each in the current season, leaving the stocks-to-use ratio largely unchanged at 0.36, a 20-year high.


Maize prices, which gained 7 percent in 2020Q3, remain 8 percent lower than a year ago. Although the projection for the 2020-21 global maize crop was revised slightly downward in October, production is expected to be nearly 4 percent higher than a year ago, as growing conditions in all main producing regions, including North and South America, are favorable. Global maize consumption is projected to grow by 2.4 percent, keeping the stocks-to-use ratio at 0.26, very similar to the previous season’s ratio.

Oil seeds:

Global oilseed output for 2020-21 is projected to increase more than 5 percent, mostly due to a 10 percent increase in soybean production. The increase in soybean output reflects a 20 percent expansion in land allocated to its production in the United States, which partially offsets last season’s large contraction following tariff-related reductions in imports by China (see discussion in the Agriculture section of the April 2019 CMO). Argentina and Brazil are projected to expand the amount of land allocated to soybean production by 9 and 6 percent, respectively.


The edible oil production outlook for the current season (October 2020 to September 2021) appears more promising than last season. Global output of the 10 major oils (including palm, soybean, and rapeseed, which together account for two-thirds of global output) is expected to grow by 1.7 percent, higher than last season’s 1.3 percent growth, but just half the average growth during the past decade. Most of the output growth is expected to come from soybeans (4.5 percent) and palm oil (3 percent).


Cotton prices dropped 20 percent between January and April and have risen moderately since. Despite the gains, prices in 2020Q3 were still 4 percent lower than the previous year. The price collapse earlier in the year reflected a pandemic-related 14 percent contraction in demand during the 2019- 20 season (August to July). Meanwhile, production increased marginally, thus exerting upward pressure on the stocks-to-use ratio. Early estimates for the 2020-21 season point to a supply drop of 5 percent (notably by the United States and Brazil) and a broad-based increase in demand, estimated at 6 percent. Notwithstanding the rebalancing, stocks are expected to reach a near-record 9 million tons, thus limiting the price recovery. Cotton prices are expected to gain 3 percent in 2021 following a projected decline of almost 10 percent in 2020.


The World Bank’s Beverage Price Index gained 8 percent in 2020Q3 and is almost 11 percent higher than a year ago. The increase was led by coffee and tea prices, though the former has weakened recently (figure 9). The index is expected to post a moderate gain in 2021, following a projected increase of nearly 7 percent in the current year


The World Bank’s Fertilizer Price Index fell 4.2 percent in the third quarter of 2019 (q/q) following two consecutive quarterly declines. A marked decline in phosphate prices drove the index lower. Urea prices rose, however, and potash prices remained unchanged. Fertilizer prices are projected to rise 2.2 percent in 2020, after an expected 0.6 percent loss in 2019, on continued acreage expansions. Risks to this outlook are broadly balanced. Upside risks include higher input costs, while downside risks include a restarting of idle capacity.

Source: Commodity Markets Outlook : A World Bank Quarterly Report