Spend Matters welcomes a guest post from James Hutchings of Mintec.
Now that 2013 is over and the major agricultural harvests in the Northern Hemisphere have been finished and assessed, it is a great time to look back and see how commodity prices have fared over the last 12 months. The grains and vegetable oils markets have generally seen significant drops in price as the harvests improved year-over-year. However, dairy has tended to rise in price due to bad weather affecting production.
The Northern Hemisphere grain harvest was good this year for the major producing and exporting countries. US corn production reached a record level for the world’s largest producer, due to favourable weather conditions in the Corn Belt. As a result, global maize production also reached a record high, with ending stocks increasing this season. High production levels were also seen for both the Black Sea region and Europe, resulting in a fall in prices following the previous year’s drought-induced high levels.
Vegetable oil prices also fell over the past 12 months, as both soybean and rapeseed crops have reached record levels. US soybean production rose by 4% as yields recovered due to the better weather conditions. The higher returns from soybean when compared to maize have encouraged farmers to plant more of the former, especially in South America. Coconut oil rose sharply in the last quarter of the year over fears of the impact of typhoon Haiyan in the Philippines.
A very different situation has been seen in dairy product prices, as the drought in major dairy exporter New Zealand at the start of 2013 led to an increase in dairy prices globally. However, the 2013/14 milk season in Oceania has been much better than expected, with milk output forecast up by 4.5% year-over-year.
Soft commodities have seen a mixed picture over the past year, with good supply driving down coffee and sugar prices. However, cocoa bean prices have increased and recently reached a two-year high. Cocoa bean production fell in 2012/13 and is expected to continue to fall in 2013/14. Cocoa butter prices have increased significantly, while cocoa powder prices have fallen, as the cocoa market has returned to the usual situation of cocoa butter commanding a significant premium over cocoa powder.
Whilst the global economic outlook has generally improved over the last 12 months, the continued lack of a sustained global economic recovery has limited price rises in most industrial commodities. Plastic prices have generally increased a little this year. Feedstock costs fell over the summer but then rose into autumn as crude oil prices rose and a combination of planned and unplanned production shutdowns limited availability. Most metal prices have fallen year-over-year as a result of relatively subdued demand.
Crude oil prices finished the year even. After the price increases, the market was concerned that the slower-than-expected world economic growth may reduce the growth in demand. Political tensions continued to escalate in the Middle East, raising the risk of potential supply disruptions to the crude oil supply. Despite the lack of a strong economic recovery, global crude oil demand is still expected to continue to grow for the foreseeable future.