Rice rises 1.8%, soybeans 1.6%, coffee 5.9%, cocoa 1.5% last week
Amid continued supply chain disruptions stemming from the Ukraine war and the coronavirus pandemic, commodity markets maintained an upward trend over the previous week, with the US Federal Reserve striking a moderate tone.
Risk appetites increased after the Fed released the minutes from its May 3-4 meeting last week, which expressed determination to keep raising interest rates until evidence emerged that inflation is falling.
St. Louis Fed President James Bullard said on Friday that key market rates have already moved above pre-pandemic levels, which may help encourage a soft landing — a process in which a central bank raises rates against high inflation and causes an economic slowdown, but avoids a recession.
Fed Chair Jerome Powell, on the other hand, indicated on May 12 that a soft landing for the economy could be “challenging.”
The bank has faced criticism since the end of last year for not taking climbing inflation seriously, as Powell had long called high consumer and producer prices “transitory.”
Analysts said the Fed meeting minutes did not contain anything surprising about the bank’s monetary tightening.
Despite fears of recession, commodity prices followed a positive course last week with positive expectations on activity and ongoing supply problems.
The retreat in the dollar index also reflected positively on commodity prices.
Rice rose 1.8%, soybeans 1.6%, coffee 5.9%, and cocoa 1.5% last week.
An ounce of gold rose 0.4% last week, as did silver by 1.6% and palladium by 5.4%.
The softer tone of the Fed’s last meeting also served to boost gold.
Analysts said that developments pointing to continued inflationary pressures and recession fears promoted caution among investors, adding that demand for safe havens had increased.
Concerns on the negative impact of supply chain disruptions in the global automotive industry also caused palladium prices to rise.
In the over-the-counter market, copper rose 0.3% per pound, with zinc climbing 3% and nickel 1.5%.
Natural gas peaked
A positive trend was also observed in energy commodities last week. The barrel price of Brent oil increased by 4.3%.
Natural gas traded in the New York Mercantile Exchange,which saw a peak of over 13 years with $9,401, ended the week with 8% gains.
The increase in Brent oil prices was driven by expectations that oil demand will rise due to the arrival of the busy travel season in the US, set to continue from Memorial Day on May 30 until September.
The decline in commercial crude stocks in the US exceeded expectations, with prices also pushed up by prospects for an agreement by EU country leaders on a sanctions package that includes stopping oil supplies from Russia.
Volatility remains in agricultural commodities
The recent volatile course of agricultural commodities continued last week.
Wheat and corn traded on the Chicago Mercantile Exchange fell by 1% and 0.3%, respectively, while rice rose by 1.8% and soybeans by 1.6%.
Cotton fell 1.9% and sugar 1.5%, while coffee increased by 5.9% and cocoa by 1.5%.
The increase in production estimates and the fall in export data affected agricultural commodities downwards.
News that Russia and India will impose restrictions on rice exports also caused supply-related concerns.