After a market recession due to the outbreak of "Covid-19"
Dubai Chamber: The discovery of a Coronavirus vaccine would constitute a "positive" shock to global commodity prices
Thai rice prices recorded an increase of 1% in June compared to May 2020
A recent economic study by the Dubai Chamber of Commerce and Industry said that the discovery of a vaccine for the emerging corona virus (Covid-19) will cause a global shock in commodity prices, after a period of recession in commodity markets due to the outbreak of the virus.
The study indicated that if a vaccine is found for the virus, the positive shock will extend to all commodities, especially energy prices, with the return of industrial demand to normal, expecting that the rise in some precious metals such as gold will diminish, while silver prices can receive support, Thanks to the boom in industrial demand.
The study, of which Emirates Today obtained a copy, stated that the large-scale sales of global commodities that were triggered by the outbreak of the pandemic stopped before paving the way for a wave of price hikes, amid an improvement in market confidence, as cities began to emerge from the closures. At a time when government stimulus programs paved the way for a gradual economic recovery.
Agricultural commodities
The study revealed that the agricultural commodities index, which is issued by the World Bank monthly, reached 83.5 points in June 2020, which is in line with pre-Coronavirus levels, indicating that agricultural commodities were the least affected by the pandemic among all types of basic commodities.
The price of a kilogram of tea at the end of last June was $ 2.84, as prices witnessed an increase of 21% against the backdrop of a sudden decline in production due to lack of labor as a result of the closure, in addition to India's floods.
In contrast to tea, coffee (coffee) prices suffered a drop of “-9%” between April and June 2020, to settle at $ 3.12 per kilogram (Arabica), against the backdrop of the closure measures, which led to stagnation in demand by the retail trade.
In addition, the recovery in energy prices encouraged Brazil's sugar factories to use more supplies to produce ethanol, which affected the volume of sugar exports, and thus helped to raise prices by 19% since April 2020.
Thai rice prices recorded an increase of 1% in June compared to May 2020, to reach 501 dollars per ton, mainly due to the strengthening of the currencies of major buyers, such as Brazil. Nevertheless, rice recorded a cumulative decrease of -7% between April and June 2020 on the back of low demand, especially the cancellation of a tender from the Philippines, which is a major importer.
In turn, wheat prices recorded a drop of -9% between April and June, to settle at 198 dollars per ton. The "downward" pressure came from new crops in the northern hemisphere, and improved expectations for producers in the Black Sea region.
As for cotton prices, they increased by 7% during the period from April to June, to reach 1.49 dollars per kilogram, on the back of lower production in the United States, Turkey, Tanzania, and Mexico.
Precious metals
The study pointed out that despite the initial decline of -16% between January and April 2020, the metals index showed some flexibility, to record a recovery of 12% between April and June 2020, supported by the resumption of industrial activity in major economies.
The study stated that the pandemic led to the brilliance of precious metals, as the index achieved a gain of 9% in January and June 2020, taking advantage of the safe haven status of precious metals, especially gold.
She pointed out that after the prices of most commodities reached their lowest levels in April, these prices increased as cities exit the long closures. However, there were few exceptions to this recovery, as some commodities, especially metals, continued to decline on the back of increased productive capacities and a number of other fundamental factors, such as lower production costs.
The yellow metal (gold) ended the month of June at $ 1732 an ounce, achieving a growth of 3% since April, and while this increase appears relatively modest, the cumulative gains for the metal since the beginning of the epidemic (i.e. January 2020) have reached 11%.
In turn, silver began to attract more investor interest as an alternative to gold, as safe-haven prices approached record highs, as large financial fund flows pushed the price of silver up by 18% between April and June 2020, to settle at $ 17.7 an ounce.
Aluminum ended June 2020 at $ 1,569 a tonne, after prices had seen a 7% increase since April.
Power indicator
The study stated that energy prices were not good in light of the pandemic, as the energy group price index reached its lowest level last April, yet prices recorded a good recovery in May and June 2020, as signs of improvement began to appear in global demand.
Brent crude oil prices recorded a recovery of 71% during the period from April to June, to settle at $ 40 a barrel, making it the best performing commodity after the price per barrel reached $ 24 in April.
Meat and poultry
The study revealed that the price of a kilogram of chicken meat increased by 23% at the end of June 2020, bringing the price per kilogram to $ 1.57, driven by increased consumer demand while easing restrictions on the movement of people.
Also, beef prices rebounded, and to a lesser extent chicken prices, in June 2020 due to increased export potential in the main producing areas, however, beef prices still recorded a cumulative 15% increase in prices since April.
- Agricultural commodities were least affected by the pandemic among all types of commodities.