Commodity futures index (CRB) edges down on PBoC’s devaluation mechanism

The solidifying the strength of USD and apprehensions over Chinese economy has been pressuring commodity markets. The CRB commodity index, the most tracked commodity futures index, is down 14 percent so far this year. The crops are in the middle of harvest pressure and then the Chinese devaluation, the broader macro issues - it's not a bullish environment.

China's imports have been more costlier owing to the falling yuan, thus, if the country cannot buy as much of these as before, there may be a bigger surplus of crops, the actions of PBoC to lower the yuan's peg against the US dollar will have far-reaching consequences - even as far as your plate. China is one of the world's biggest importers of what are known as "soft" commodities - including key ingredients such as soybeans.

According to the US agricultural department, there will be a better crop of corn, soybean and wheat this year than previously thought in its benchmark world agricultural supply and demand estimates report crop report, another factor which could drive up supply. In almost every possible way, the USDA was more bearish than expected.

Cynicism may be lingering on some of the above standpoints; commodity avenues are thinking that maybe the USDA got it wrong. Also, where the yuan slips, other emerging market currencies could follow, and if they are major food exporters like Brazil, the world's biggest producer of coffee, sugar cane and soy, this could continue to drive down the cost of the food on your plate. The Brazilian real has already hit 12 year lows against the US dollar recently, which has helped sugar prices continue their slide.