Tata Consultancy Services: A story...
Tata Consultancy Services (TCS) is the world’s most valuable IT company. Read this success story of how TCS expanded globally, acquired new verticals…
13 Jun, 2021
7 min read
1696 Views
Prices of commodities in the energy, metal and agriculture sectors have seen a sustained rise in the first few months of this year.
These raw materials, used to produce almost everything else, are becoming more expensive as the global economy seems to shrug off the slump that accompanied the coronavirus pandemic.
The rally in prices of commodities such as corn, steel, copper and lumber was not seen for many years, but comes with the possibility of an increase in prices of everything else. Economies across the world are opening up as the number of fresh COVID-19 cases falls, vaccines are rolled out to large swathes of the population, and restrictions on travel are eased. However, reflation trade has also picked up as a result and raised expectations of inflation. The reopening and recovery of the economy are responsible for this surge in prices.
In a biannual report, the World Bank, however, cautioned that this increase in the prices of commodities depends on how the COVID-19 situation unravels further. Countries’ ability to control the pandemic, policy measures and decisions around the production of commodities will be telling of the price of commodities for the remainder of the year.
Metals
Copper, due to its extensive use in electrically operated products, saw a massive rise in prices because governments around the world pledged to give a boost to renewable energy. Subsequently, this meant an increase in the production of electric vehicles and more dependence on fuel-efficient technology.
The use of copper in products such as electric cars, solar panels and power grids has resulted in skyrocketing prices. As demand for low-carbon technology increases, the usage of copper is expected to rise exponentially, also giving rise to its prices.
Countries such as the United States which are on the path to rebuilding their infrastructure will be propelling a massive demand for metals. US President Joe Biden's announcement of $2.3 trillion for the reconstruction of railways and electricity grids is an example of such spending. Countries like Chile, which is a massive producer of copper, and Australia, a leading exporter of iron ore, stand to benefit.
However, on the other hand, the Chinese government is attempting to curb the production of important metals such as aluminium and steel. This is bound to have a bearing on the global prices of these metals, since these prices are defined by global cues.
Steel prices saw a massive surge, with steel futures in the world's largest producer, China, breaking all records. This has occurred in the backdrop of the government taking steps to halt the output of steel. In Europe and America, where production is already being carried out at maximum capacity, benchmark prices were given a boost as they attempt to meet high demands.
This is in contrast to the struggling steel production in America and Europe until recently, which was bearing the brunt of global overcapacity. As a result, the industry saw massive job losses over the past decade.
Agricultural goods
Due to COVID-19 and other disease outbreaks among farm animals such as the pig disease that wreaked havoc in Germany, meat businesses have suffered. A rise in the prices of crops has also dealt a blow to the production of meat from pigs, poultry and cattle. Corn fed to farm animals saw a doubling of prices over the previous year, while soybean meal prices rose by 40%.
The United Nations Food and Agriculture Organisation said that food prices rose for the eleventh straight month in April. They reached the highest level since May 2014. The FAO's price index, which takes into account the prices of oilseeds, cereals, dairy products, sugar and meat rose in April to 120.9 points, as against 118.9 points in March.
The prices of agricultural produce shot up over the previous year, thanks to limited supply from South America and high demand in China. The futures of Arabica coffee increased by 33%, and wheat prices were the highest since 2013. The price of raw sugar also shot up. Prices of these commodities are expected to stabilise in 2022.
Energy
Prices of crude oil reached record lows over the course of the pandemic, but bounced back supported by global economic recovery and a decrease in production by the Organisation of the Petroleum Exporting Countries (OPEC). The demand for crude oil will also rise as restrictions are eased and vaccines become available.
The average energy prices are expected to increase by one-third than in 2020 and oil may average at $56 per barrel. Crude oil may even average at $60 per barrel in 2022.
Conclusion
Commodity prices, although an indicator of inflation, do not define inflation by themselves. The increase in the price of these goods also takes a long time before being reflected in the price borne by consumers. It is only a small part of the cost to retailers who often choose to not pass it on to customers. However, there is a limit to the amount that can be absorbed by the retailer, before these prices begin to affect the end customer.
The World Bank, however, has said that although economic growth has picked up in early 2021, there is much uncertainty around the durability of this recovery. Even though most commodity prices are above the pre-pandemic levels, developing countries, exporters, importers and emerging market economies must divert their focus towards bolstering their short-term resilience, the global body has advised.
How would you rate this blog?
Related Blogs
Translate the power of knowledge into action. Open Free* Demat Account
Latest Blog
-
11 Jul, 2021
11 min read
Go Air IPO: Go Air looks to enter the IPO market
GoAir, one of India’s most popular airlines, is preparing for an initial public offering (IPO). Rebranding itself as “Go First”, the airline filed a …
-
10 Mar, 2021
7 min read
PVR - a comeback on the cards?
Who doesn’t like to watch movies. But when the COVID pandemic first hit the Indian subcontinent, investors began to withdraw from their investments -…
-
06 May, 2021
9 min read
Should you place your bets on ITC?
Investors trading on the stock market are advised to focus on maximising their wealth by making shrewd decisions based on the performance and fundame…
-
01 Apr, 2021
7 min read
Vodafone-Idea: What went wrong?
Mergers and acquisitions can turn the eyes of stock market investors towards the possible action that such large-scale actions can bring to the futur…
-
21 May, 2021
8 min read
Asian Paints: 7000% returns in 17 years
Some investment propositions have the ability to make investors – both the newbie and the expert alike – stop and stare.
-
07 Apr, 2021
7 min read
The Tata Motors Upheaval Story
The automotive industry has been famously tied to the performance of the extended economy for most countries.
-
28 Dec, 2020
6 min read
The Rise of Reliance: as told through its stocks
Reliance Industries Limited (RIL) is India’s largest publicly traded company. Read on to know more about history of Reliance stocks and it’s rise in …
-
07 Jul, 2021
10 min read
Ixigo IPO: Ixigo Plans a 750 Crore IPO
Ixigo is a travel portal and it plans to host an IPO of between Rs 1500 crore to Rs 1800 crore later this year.
-
08 May, 2021
8 min read
Adani Ports and its recent rise. Here's why
If you have been following the rise of Adani Ports’ stock price in recent weeks, you are probably curious as to what is driving this growth.
-
15 May, 2021
8 min read
The Best Penny Stocks in India
Investing and trading on the stock market has the potential to generate profits.
-
05 Mar, 2021
7 min read
The LIC IPO Game Plan
IPOs have attracted overt attention of retail and institutional investors alike in the recent Indian stock market scene.
-
30 Aug, 2021
7 min read
Should you Invest in the Latest Sovereign...
For the uninitiated, sovereign gold bonds can be understood to be certificates issued and mandated by the Reserve Bank of India.
-
09 Jul, 2021
9 min read
IPO Alert! Devyani International files...
Against all odds, the Indian market, despite a minor tailspin due to the nationwide lockdowns last year, has seemed to recover relatively well.
-
27 Jan, 2021
9 min read
HDFC Bank Ltd’s Journey to becoming the...
As of November 25, 2020, HDFC Bank had hit a market cap of ₹8 Lakh Crore and had become the third company to do so after Reliance and TCS.
-
31 May, 2021
7 min read
The Rise of Metal Stocks Amid the 2nd Wave
The past few months have brought with them several changes.
-
01 Jun, 2021
8 min read
Muted Tata Communications stock in wake...
There is a meme going around that says: Sneezes went from “Bless you” to “To hell with you” real soon.
-
06 Oct, 2021
5 min read
Byju’s IPO Plans
Currently, India's most valuable unicorn, online education provider Byju's, is in talks to raise $400 million to $600 million and then expedite plans…
-
24 Sep, 2021
7 min read
Indian Railways Share Quarterly Results -...
The Indian Railway Catering and Tourism Corporation (IRCTC) is a subsidiary of the Indian Railways.
-
16 Mar, 2021
8 min read
Indiamart’s QIP: behind the scenes
Last year, when the pandemic had hit businesses hard across the globe, most people resorted to the internet to keep their businesses afloat.
-
08 Jul, 2021
10 min read
The Success Story of Pharmeasy
Today, PharmEasy is a reputable and well-known firm whose aim is to become the best health care delivery platform in India.
-
05 Oct, 2021
7 min read
LIC IPO: All we Know So Far
While investors await the Life Insurance Corporation's mammoth public offering mostly happening this financial year, why do experts think the IPO has…
-
04 Apr, 2021
7 min read
Dr. Reddy's Laboratories Ltd - Is this...
2020 was a peculiar year, especially in terms of the industries that managed to flourish despite the challenges that the lockdowns and isolation meas…
-
23 Jul, 2021
8 min read
Laurus Labs Share: More than 50% Return...
Shares of pharmaceutical and biotech company Laurus Labs have continued to surge upwards and have hit a new high amounting to INR 599 per share on th…
-
03 Jun, 2021
6 min read
Hotel Stocks on the Rise Despite Lockdown
The hospitality industry suffered a major setback when the prime minister announced a nationwide lockdown for 3 weeks at the end of March 2020.
-
13 Oct, 2021
6 min read
LIC Seeks to Appoint CFO
According to a notice on its website, the state-owned Life Insurance Corporation of India (LIC) is looking for a Chief Financial Officer ahead of an …
-
29 Oct, 2021
7 min read
Sugar Stocks Down as Sensex Falls
Sugar stocks are indicative of important trends in the market. They are also an important cog in the industries sector of the economy. Read on to kno…
-
23 Aug, 2021
6 min read
Clean Science, GR Infraprojects IPO...
This article seeks to shed light on initial public offerings (or IPOs) that have recently been up for grabs in the market. Included among them are Cl…
-
15 Jun, 2021
10 min read
A sneak peek at Zomato's IPO plans
Covid-19 came and turned the world upside down – tourism, airlines, fashion, F&B have suffered tremendously but online financial gateways, video conf…
-
11 Jun, 2021
7 min read
Stock Picks Based on Q4 Results
As FY21 drew to a close, it was a déjà vu moment as lockdowns (although state-level), and a second wave of the COVID-19 pandemic defined investor beh…
-
24 Aug, 2021
5 min read
Stocks to Watch: NMDC, Tata Motors,...
This article seeks to shed light on stocks that have recently been made available in the market. Included among them is the government’s stake in NMD…
-
24 Feb, 2021
7 min read
Shree Cements: A lesson in Prudence
This article will help you take a deeper look into the rise of Shree Cements, through the lens of it’s stock performance over the past few years.
Ready To Trade? Start with
Subscribe to #SmartSauda Newsletter
CONTINUE WITH GOOGLE
CONTINUE WITH FACEBOOK
