Soft Commodities Performance

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Periodic table of soft commodities performance

The future price of timber in 2017 rose by 36%, surpassing the $400 threshold for the first time in about 10 years. The increase is linked to the price war between Canada and the United States with the latter having imposed taxes to counter Canadian timber dumping.

The liberalization of Japanese controls on rice production and major flood in Bangladesh and the south of the US has triggered a price increase of over 23%.

A sharp drop of price in 2014 put a strain on cotton producers, pushing them out of the industry. However, the price of cotton has recovered since then, ending 2017 with an increase of 11%.

The performance of grains, from wheat to corn to oats, has been moderate. In fact, the market has become less profitable due to abundant production and low volatility, in addition to changes in the market in favor of more niche products. Oats reported a return of 5.47%, wheat had a return of 4.66%, while corn suffered a slight loss of .36%.

Soybean derivatives experienced a decline due to strong production in Brazil; the country has in fact surpassed the US as the largest exporter to China.  Brazil has more than doubled volumes produced in the last 15 years, contributing to the decline in price of soybean and soybean oil, falling by 4.21% and 4% respectively.

Palm oil decreased by 18.62%; this is due to the increase in production after the decision of many farmers, especially in Indonesia, to leave the production of cocoa. Instead they devote themselves to the production of palm oil, which is easier to grow.

The price of cocoa experienced a downward trend throughout 2017. Starting in the beginning of the year, the combination of a more widespread reduction in consumption in the major world markets and a large increase in supply, also due to favorable climatic conditions, led to a price reduction.

Sugar price saw a sharp decrease due to the increase in production in Europe, Thailand, Brazil and India. The lower prices could however leave room for an increase in consumption in the years to follow even if, however, we are witnessing a slow decline in demand due to changes in consumer preferences.

Coffee has suffered a decline due to solid production in Brazil. Expectations are now reversing in favor of a rise in the medium term, driven by an increasing demand.

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