The price of most commodities have risen year-on-year, but some falls have been seen in recent months fuelled by concerns over the health status of the world economy and the effect that this could have on the global demand for both agricultural and industrial products.

The price of crude oil has been falling since May, influenced by growing concern over debt levels in Europe and the US. Global demand for crude oil has lessened, with imports from China having recently fallen to their lowest level for twelve months. Crude prices still remain up year-on-year. This has lent some support to vegetable oil, sugar and maize, all prospective feedstocks for biofuel.

Vegetable oils rose sharply in the second half of 2010 as poor weather in Canada, the EU and the Black Sea region resulted in production losses in both the rape and sunflower seed crops. Persistent dry weather in Argentina, as a result of the La Niña phenomenon, also harmed the soyabean crop. Oils prices started to fall back slightly at the start of 2011, as oilseeds and their corresponding oils have all suffered reduced import demand from China, India and other strong buying nations.

Grains are for the most part up on last year, driven by growing feed requirements from expanding livestock industries in developing countries. Milling wheat started to fall back at the turn of the year and has continued to do so after Russia removed its export ban to the international market. Grain supply in Russia has improved dramatically compared to last year when export bans were imposed due to low domestic supplies resulting from last summer’s drought. Durum wheat prices have been steadily climbing as the world demand increased and US reduced its planting areas.

EU dairy prices have strengthened over the past twelve months supported by significant export demand. Russia, the world’s largest importer of dairy products, has raised its imports considerably. The drought last summer caused damage to a significant quantity of the country’s feed crops. This led to a decline in the Russian dairy herd and diminishing domestic milk output as a result.

Soft commodities have seen mixed trends over the last year. Tea prices rose in Kenya, as the country was plagued by drought, but fell year-on-year in Sri Lanka, as improved weather and better agricultural practices helped to boost production. Cocoa beans fell as Ivory Coast and Ghana both produced bumper harvests this season, but cocoa powder strengthened, as demand for the product has been strong, in particular among food and beverage producers in Asia. Sugar and coffee prices were both up on the year, due to high demand and low supply.

Cotton prices rose sharply in the six months leading up to February 2011, peaking at record highs. Severe flooding led to production shortfalls in major producing nations such as China and Pakistan and global output was unable to keep pace with accelerating demand from China, the world’s largest importer. High cotton costs prompted textile manufacturers to switch to cheaper man-made fibres such as polyester and cotton prices have consequently fallen to levels last seen eleven months ago.

In Europe, plastic prices rose last winter, after a period of inactivity, as the cold weather disrupted supply in parts of northern Europe and resin feedstocks gained strength from a surge in crude oil. In May, however, price reductions in crude oil filtered through the supply chain into plastic feedstocks such as ethylene. LDPE demand weakened and suppliers were eventually forced to lower prices due to ample global supply and competitively priced Asian imports.

European pulp prices fell as Europe stepped up production and stocks rose. However, demand from the paper industry strengthened in both the EU and Asia, softening the price drop. The reduction in pulp is now being seen in some forms of packaging material.

The trend for base metals has tended to rise in the last twelve months, most notably copper and tin, as infrastructure investment has continued to expand in emerging countries such as China and India. These metals retreated however, earlier in the year, as concerns mounted over an economic slowdown, particularly in China, the world’s largest buyer. Unsurprisingly, rises in the precious metals were more significant, as investors tend to view these as more stable assets in times of economic difficulty. Silver more than doubled over the past year and gold was up by almost a half.

Jade Savage