Non-energy commodity prices fell by 1.6 percent in August while energy prices dropped 6.3 percent. Most of the declines were for industrial commodities owing to concerns about demand and numerous macro/financial/credit risks. Gold and silver prices rose amidst the uncertainty on safe haven buying. Agriculture prices were essentially flat overall, with grains prices up on downgrades to U.S. harvest estimates, but these were offset by declines in coconut oil, cotton and cocoa due to improved supply prospects.
Crude oil prices (World Bank average) fell 6.9 percent in August, averaging $100.5/bbl, on deepening concerns about demand. The prices for Brent and WTI continued to diverge—to $110.1/bbl and $86.3/bbl, respectively—on expectations of greater oversupply at Cushing OK from increased oil flows from Canada. New pipeline capacity to move crude from Cushing to the Gulf coast is not expected until 2013. Inventories at Cushing have actually declined from earlier highs, as the large discount has enabled crude to be economically transported to the U.S. Gulf by rail and truck. Meanwhile, the price of internationally traded Brent has recovered from its August low and exceeded $116/bbl in early September. The market for light/sweet crude remains tight due to a number of supply constraints, e.g., the loss of Libyan exports, maintenance and production problems in the North Sea, pipeline disruptions in Nigeria, and EU sanctions against Syria.
Agriculture prices edged up 0.1 percent in August. Grains prices jumped 4.5 percent—led by gains in sorghum (12 percent) and wheat (8 percent)—on continuing downgrades to U.S. yield estimates following a delayed spring planting season and a hot and dry summer. Rice prices rose 5 percent as Thai producers began holding back sales after the new government announced it will increase farmgate prices. Logs prices also rose 5 percent on continued firm demand in Japan for reconstruction. Offsetting these gains, coconut oil prices plunged 13 percent due to recovering production in the Philippines after above-normal rains. Cotton prices dropped 6 percent reflecting expectations of improved current season crop and weak demand from the textile industry. Cocoa prices fell 3 percent on expected higher shipments from West Africa.
Metals and minerals prices fell 4.4 percent in August due to increasing worries of slowing economic growth on metal demand. All base metal prices fell sharply, led by declines of more than 10 percent for tin and lead, owing to rising stocks. In the case of lead, demand in China has slowed due to shutdown of lead-acid battery plants for environmental inspection. Prices for copper and aluminum fell less—down 6-7 percent—because markets are relatively tight. Although China’s copper imports are down this year, mine supply problems globally have kept prices relatively firm. For aluminum, a significant portion of inventories are tied up in warehouse financing arrangements and are unavailable to the market. Meanwhile gold prices moved to new highs on strong investment demand.
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