The 35th CyclOpe report on commodity markets, which was published on 26 May, highlights that the prices of agricultural commodities did not evolve at the same rate as those of industrial metals and energy. This is due to the economic crisis that has resulted from the ongoing pandemic.
The price of industrial metals and energy collapsed, before firmly recovering at the end of the year due to strong Chinese demand. However, the average cost of these items has not reverted to that of 2019 levels.
Cocoa prices are stagnating, and not because consumption has been paralysed by the pandemic
On the other hand, agricultural commodities – such as palm oil (+28%), rice (+16%), coffee (+8%) and cocoa (+1%) – have done better than resist. The only exception is cotton, whose average prices have fallen by 8%.
CyclOpe expects that commodity prices will continue to rise in 2021, particularly for all agricultural products: +26% for palm oil, +20% for coffee, +20% for maize, +11% for cotton, +5% for rice and +1% for cocoa.
Even though Philippe Chalmin, the report’s coordinator, believes that “agricultural tensions should not be exaggerated”, it is obvious that commodities have once again become an asset rich in potential capital gains among investors.
The markets are therefore on the lookout for information on insufficient stocks – for example, for oils at their highest level in 10 years – and on China’s appetite – for cotton, for instance – which is on the rise again. Finally, they are also interested in products that are in excess of supply over demand – for example, cocoa, which is in poor shape.
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The report also analyses the paradoxical bean market. The tug of war taking place between Côte d’Ivoire and Ghana – which was responsible for 62% of the world’s production between 2019 and 2020 – as well as multinational chocolate companies, seemed to benefit producers.
By demanding a ‘decent income differential’ from buyers of some $400 per tonne exported, the two countries obtained a 21% increase in selling price for Ivorian producers and 28% for Ghanaian producers in 2020. The fact remains that cocoa prices are stagnating, and not because consumption has been paralysed by the pandemic.
“Overall, West African supply is high enough to act as a lead weight for the market whenever prices appear to be rising,” says the report, adding that some multinationals have limited “their purchases of West African origin cocoa to avoid paying the new high price” and have turned “to beans from certified future market warehouses.”
Planters are now finding it difficult to sell their crops and the multinationals have not yet had their last word.
Africans also intend to be proactive regarding other products, such as tropical wood. Thanks to Vietnam in particular – which “has established itself as a major player in the timber trade”, according to CyclOpe – the prices of logs and processed products have continued to rise.
It is true that Central Africa’s decision to stop exporting logs from 2022 and to develop local processing is changing the situation. Gabon even intends to become the world leader in processed tropical wood by 2023.
Although it is impossible to predict whether this will result in a rise or fall, the timber market will be affected in the coming years due to efforts to tackle global warming.
This is because large international companies want to achieve carbon neutrality by offsetting their greenhouse gas emissions. They hope to accomplish this by planting millions of hectares in tropical forests, where trees can grow and be harvested much more quickly.
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