Hot Commodities

Hot Commodities

Hot Commodities: Weather Problems, Pet Food, Tin, Brazilian Grain, and Oil

[August 2nd, 2020]

Hi all,

This week we will be looking at the shortages in the pet food supply in North America, how global food supplies have been slammed by bad weather as prices rise, and how Brazil plans for record harvests by 2024. We will also look at the record-breaking prices in the market for tin and how OPEC+ increased supplies and will still see a high oil price.

World’s Food Supplies Get Slammed By Drought, Floods, And Frost

The extreme global weather patterns have greatly affected agricultural production, resulting in higher food prices that also hurt the fight against hunger.

According to Bloomberg News, Brazil was one of the largest agricultural countries hit with bad weather, resulting in its worst frost in twenty years, greatly affecting coffee trees and increasing their prices.

Coffee prices increased to $2 a pound for the first time since 2014. Brazil is the world’s largest exporter of sugar and orange juice while also being one of the larger exporters of corn and soybeans. Brazil also accounts for 40% of the world’s Arabica coffee.

China has seen floods affect key pork production areas, increasing the threat of disease and prices for consumers in the country. Europe has also faced heavy rains that raise the risk for fungal diseases in grains, while North America has experienced a heatwave and drought badly damaging crops.

Agricultural commodities, unlike other commodities, are more affected by the weather. Any changes can affect the production of key global staples in a short period of time. The global agricultural trade is of course, interconnected, and weather-related challenges affect both domestic and international food supplies.

Pet Food Shortages Leave Owners On The Hunt For Kibble And Cat Treats

North American pet owners are having problems tracking down their usual pet foods from the large retailers as supply has been affected by the increases of cost for key ingredients, some of which have increased 8% to 20%!

According to Reuters, key products such as corn, soy, meat, and increased logistics costs have affected supplies. Pet food has not been spared by the pandemic, products such as salmon flavored whiskers and Royal Canin kibble are missing from supermarket shelves.

US consumers spent close to $26 billion on pet food from July 2020 to July 2021, an increase of 4.7% from 2019 and a 7.8% increase from 2018.

Tin Prices Reach Records As Delta Variant Disrupts Supply

Tin has seen prices rise to an all-time high due to disruptions in supply from key producing nations. The London Metal Exchange sees the price delivered in three months at $34,000 per metric ton, beating its record a decade ago.

According to The Wall Street Journal, prices are up 9% this month and approximately 70% this year. The Delta variant of the coronavirus has affected the key producers that include Indonesia, Malaysia, Myanmar, and Rwanda.

Tin is used to produce solder, which is a melted metal that is used to connect computer chips to circuit boards that are used for consumer electronics. The demand for electronics and renewable products has attracted investors to tin and other industrial metals such as copper.

Brazil Targets 300 Million Tons Of Grain For The 2024/25 Harvest

Brazil plans to produce more than 300 million metric tons of grain by the 2024/25 harvest as opposed to the previous target season of 2027/28. Current projections show that production will continue to grow at 27.1% per year until 2030/31, when volume will reach 333 million tons.

Merco Press reports on how Brazil produced over 262 million metric tons of grain in the 2020/21 season, according to CONAB, the national food supply company. The gross production value of this is estimated to be over $200 billion.

There remains a huge growth potential in the domestic and international markets for Brazilian cotton, soybeans, corn, pork, beef, chicken, and mangoes, all of which have great potential in productivity growth over the next decade.

Oil Settles Up Near $75

Oil has settled at $75 a barrel this past week after the US crude inventories were short of pre-pandemic levels and bringing the markets to focus on lower supplies with Brent crude trading at $74.74 a barrel and West Texas Intermediate (WTI) settling at $72.39 a barrel.

According to Reuters, oil prices are up by 45% this year as the global recovery takes place.  OPEC countries and its partners, known as OPEC+, are changing their position on cutting supplies by allowing an increase up to 400,000 barrels per day from August. This increase may be too low to have a significant movement in price.

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-Editors, Ronnie Luwero and Emily Shoemaker