Agricultural raw materials prices weaken amid COVID-19
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The World Bank’s Raw Materials Price Index experienced a modest recovery in May after registering large declines in early 2020. The index is projected to drift lower in the second half of 2020 before picking up in 2021. The recovery, however, is not expected to offset this year’s losses.
Cotton
The health crisis resulted in declining demand as a result of global mitigation measures, which was further compounded by rising stocks. However, the weakening conditions of early 2020 are anticipated to continue, pushing cotton prices below 2019 levels.
Global cotton production is expected to fall to 25.6 million metric tonnes (mmt) during the 2020-21 crop season, slightly lower than the previous season’s 25.9 mmt. Stocks are projected to rise by 5% through the end of the 2020, reaching the highest level observed in six years. Consumption of cotton is expected to remain stable this year (compared to 2019), or 6% lower than in 2018.
Natural Rubber
Similar to the trends observed for cotton prices, rubber showed a strong recovery (5%) from April to May.
Numerous tire manufacturing facilities have temporarily closed around the world, especially in Europe. Production of natural rubber experienced heavy disruptions and exports from the world’s dominant suppliers (Indonesia, Malaysia, Thailand, and Vietnam) were down almost 5% compared to a year ago. These countries account for more than 80% of global natural rubber supplies.