 - EconoTimes)
Understanding commodities are vital to gauge the performance of other asset classes such as bonds, equities, and even currencies. Since, 2014, any regular follower of financial markets would be able to recall that how devastating the drop in oil prices has been for many countries like Russia, Brazil, Mexico, and Malaysia whereas net importers of oil like India have largely benefitted from it. Hence, it is of utmost importance to investors to keep a tab on the trends in the commodities market.
Historically speaking, a rise in commodity prices has triggered a vicious chain reaction. First, the prices of commodities go up, which in turn triggers a rise in inflation, which again has historically triggered selloffs in bonds, which has not been good for equities in some cases.
In this Commodities Watch we present to our readers, the performance of commodities, which in turn decide the well-being of many commodity producing and consuming nations. For example, the price of Cocoa is extremely important for Ivory Coast, which is the biggest supplier of the commodity.
For another Example, India is set to import record wheat this year; hence, the wheat price is of utmost importance for inflation in India.
Biggest producers:
- Rough Rice – India, China, Indonesia, Bangladesh, and Thailand
- Soybean – United States, Brazil, Argentina, China, and India
- Canola oil – Indonesia, Malaysia, China, European Union, and the United States
- Corn – United States, China, Brazil, India, and Argentina
- Wheat – China, India, United States, France, and Russia
- Oats – Russia, Canada, Poland, Australia, and Finland
Biggest Consumers:
- Rough Rice – China, India, Indonesia, Bangladesh, and Vietnam
- Soybean – China, United States, Brazil, Argentina, and the European Union
- Canola oil – China, European Union, India, United States, and Indonesia
- Corn – United States, China, European Union, Brazil, and Mexico
- Wheat – European Union, China, India, Russia, and United States
- Oats – European Union, Russia, United States, Canada, and Australia
In this article, we evaluate the YTD performance of the grains and oilseeds, which are consumed by the almost entire world.
- The best performer of this pack so far is Rough Rice (31 percent); it didn’t perform too well last year. In 2016, it was down more than 21 percent.
- After being the best performer last year (14 percent), Soybean is down 2.75 percent YTD. The market is suffering a supply glut in Soybeans along with lower demand from China.
- After rising around 4 percent last year, canola oil is down less than 1 percent so far.
- The price of corn is down 1.55 percent YTD, after rising just 0.28 percent last year.
- The price of wheat was down more than 12 percent last year, and this year it is up 5.3 percent so far.
- After rising 8 percent last year, Oats is up 5.3 percent YTD.
In 2016, this pack was down 1.6 percent on an average, this year it is up 6.1 percent YTD. It is up 2.4 percent since our last review in August.
This is a clear indication that food prices, especially grains are not going to be a major driver of inflation around the world this year.
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