“Geo political issues continue to add uncertainty and volatility to commodity markets”
Currently, prices are still at elevated levels underpinned by a smaller than anticipated
Although there is a consensus amongst market analysts that agricultural commodity prices will continue to soften over the coming months there is some upside risk. Broad-based heat waves and dry spells in the Northern Hemisphere resulted in a smaller than anticipated crop. Weather patterns in key production regions will be pivotal in giving prices direction during the coming months. Since the rapid fall in corn and soybean prices in early July, three-quarters of the initial drop in prices has already been reversed due to weather concerns. Uncertainty around weather and ongoing geo- political issues are also likely to support the recent volatility in commodity markets going forward.
Northern Hemisphere harvest and persisting La Niña conditions causing dry conditions in South America. Concerns around easing global growth brought some reprieve to the markets, in July, which led to a significant price drop in agricultural
Northern Hemisphere harvests are lower than anticipated
commodity markets. Growth projections for countries like China, the US, the EU, and the UK have since mid-2021, consistently been adjusted downwards by institutions such as the World Bank and International Monetary Fund as a result of supply chain bottlenecks, energy price shocks, and associated surges in inflation. This has, in turn, also spurred aggressive contractionary monetary policy which is bound to curb global aggregate demand and would also filter through to eased demand for agricultural commodities.
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