This blog is the sixth in a series of nine blogs on commodity market developments, elaborating on themes discussed in the October 2021 edition of the World Bank’s Commodity Markets Outlook.
Agricultural raw material prices diverge.
Stronger-than-expected consumption outlook supports cotton prices. Cotton prices, which reached a 10-year high in October 2021, responded to the positive outlook for global consumption. On the supply side, global production is projected to increase by 6.4 percent, led by gains in Brazil (16 percent) and the U.S. (27 percent). Cotton prices are expected to increase by 5 percent in 2022.
Weakening global demand due to lower-than-expected vehicle sales—linked to the semiconductor shortage—have kept prices in check (two-thirds of natural rubber is used in tire manufacturing). On the supply side, global output increased by 5.8 percent during January-October 2021 compared to the same period last year. Most key suppliers registered increases, including Thailand (1.2 percent), Indonesia (7.1 percent), Vietnam (12 percent), and India (13.9 percent). Weaker-than-expected demand and recovering supplies is expected to exert further downward pressure on prices (projected to be 10 percent down in 2022). Risks to the price outlook hinge on supply considerations: how quickly the semiconductor sector will return to pre-Covid levels (which will affect demand for tires), and the impact of mobility restrictions due to the recent COVID-19 outbreak.
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