Monthly Commodity Update – Weather related issues affect prices

by: Georgette Boele , Casper Burgering , Hans van Cleef , Frank Rijkers

Currently, extreme weather conditions (partly as a result of El Niño) are causing sharp price increases of agricultural commodities. In Asia and Africa it is too dry, while the frequent rains in South America are adversely affecting production. Weather events are not always an important driver for commodity prices and price volatility. For example, the impact of the weather on metal prices is obviously limited. However, for energy prices the link with weather conditions is clearer. The difference between, for example, a cold or warmer winter in the Northern hemisphere has an impact on the demand for different forms of energy and thus on the prices of oil and gas. In addition, the weather can obviously have a big impact on the pricing of agricultural commodities. Because all agricultural commodities together count for 41% in the weighting of the CRB index, this is affecting this index. We expect the CRB index to increase further in the course of 2016 because of an improvement of demand.

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