De CRB-index rose on strong (Chinese) demand for some commodities. Widespread optimism over the mass roll-out of vaccine programs and the anticipated global economic recovery during 2021 also helped to further boost sentiment among investors. The index gained 15% this year already, mainly driven by rising oil, copper and food prices (soybean, corn and sugar).
Chinese demand for copper, corn and soybean caused a tightening of physical markets. Prices in these markets rose significantly on this. Oil prices rose on demand expectations. Prices also rose on the fact that OPEC+ did not raise production yet (despite higher prices). Gold prices softened further on rising US real yields and improved US growth prospects.
We think that buoyant sentiment has the upper hand in the recent run-up in commodity prices. Some commodity markets are indeed tight, but most markets still have abundant supplies. The fact that commodity market sentiment is currently this resilient, is mainly due to targeted economic support measures (in construction, infrastructure, renewables). Next to that, generally loose monetary policy increases liquidity. Downside commodity price risks arise as soon as the targeted support and/or accommodative monetary policy eases.
Monthly-Commodity-Insights-March_2021.pdf (889 KB)