Non-energy commodity prices fell by 4.7 percent in May, in part due to dollar appreciation against major currencies early in the month. There were decreases in all main indices with the exception of fertilizers which rose 7 percent on reduced production in China because of power shortages. Agriculture prices generally declined on improved supply prospects, while the decrease in metal prices was tied to worries of slower economic growth, including in China. Crude oil prices fell 7 percent on concerns about global demand.
Crude oil prices dropped 7.0 percent in May, averaging $108.1/bbl. The selloff occurred at the beginning of the month on concerns about global economic growth and oil demand. Prices were fairly flat during the rest of the month, supported by expectations of tighter markets in the second half of the year, and continued supply concerns surrounding political unrest in North Africa and the Middle East. The loss of 1.3 mb/d of Libyan light-sweet crude has tightened markets, as OPEC has done little to replace these volumes—in part because of difficulty supplying light quality crude, but also weak demand due to seasonal refinery maintenance. Inventories have declined, especially for products, and crude stocks are only high in the United States, mainly in Cushing OK because of higher imports from Canada. Global oil demand is expected to be significantly higher in the second half of the year, and most analysts see the need for much higher OPEC production to prevent a substantial draw in inventories.
Agriculture prices decreased 5.5 percent in May on improved supply prospects. Cotton prices plunged 24 percent on weak demand and an expected surplus for the 2011/12 season. Sorghum and maize prices fell 10 percent and 4 percent, respectively, on a higher than expected U.S. stocks report. However, supply risks remain because of wet spring weather and late plantings in the United States. Beef prices fell 5 percent on sluggish demand in Japan and improved supplies from Australia following flooding earlier this year. Coffee arabica prices fell 3 percent due to an expected large crop in Brazil. Partly offsetting these declines, logs (Malaysia) prices rose 12 percent due to increased demand from Japan to build temporary homes following the earthquake. Wheat prices gained 6 percent on supply concerns from drought conditions in Europe.
Metals and minerals prices fell 4.6 percent in May, on concerns about slowing demand and policy tightening in China. All base metal prices fell, accompanied by rising inventories in most cases. Tin prices dropped 11 percent due to a sharp increase in Indonesia’s production where weather conditions improved. Lead prices fell 10 percent due to falling battery demand in China’s electric bike sector. Zinc prices decreased 8 percent on high and rising inventories, while nickel prices fell on expectations of new mine supply in the second half of this year. The largest price decline was for the precious metal, silver (-13 percent), on investor liquidation following the large run-up in prices this year. The only metal to record an increase was gold on safe haven buying, in part due to investor switching from silver.
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