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Supply/Demand: The Commodities Recovery

29 September 2020   |  

Supply/Demand is a semi-regular feature of the Artisan Canvas rounding up interesting and quirky subjects from across the Internet with a focus on economic and business trends. A good rule of thumb among the Artisan Canvas editorial staff is “never reason from a price change.” With that in mind, we present Supply/Demand.

Broadly speaking, commodities prices have risen considerably since early March’s sharp downturn. Is this portending an economic recovery as demand picks up? Or are we facing down sustained supply chain disruptions?

Soybean Prices Hit Two-Year High (The Wall Street Journal)
Last year’s swine flu outbreak that swept across China decimated the country’s pork supply, depleting reserves and forcing breeders to raise plumper piglets—some 13% larger, in fact. Because big pigs need to eat a lot, soybeans futures prices have taken off, surpassing two-year highs as of late September. Thus far, ongoing US-China trade negotiations seem not to have dampened appetites for soybeans.

Nut Prices Plunge as Pandemic Fears Hit Sellers (Financial Times)
The pandemic cracked almond, walnut and cashew demand as large buyers—airlines, hotels, restaurants and bars—understandably pared purchases. Another variable for nuts is the ongoing shell game of China-US trade negotiations. China is a top importer, but sales have fallen by almost a quarter compared to last year. This lower demand coincides with clement spring weather, which has raised expectations for a third-running record US almond crop. On the flipside, lower prices could plant the seeds for increased consumption.

Jet Fuel Is now so Cheap It's Being Blended for Use by Ships (Bloomberg)
Thanks to its purity, jet fuel typically commands a premium compared to most other distillates. But plummeting demand has resulted in lower prices for jet fuel than maritime fuel—a cruder final product. Producers are consequently—and understandably—reformulating jet fuel for maritime industry use.

Copper Prices Rise Above $3 Amid Growth Hopes (The Wall Street Journal)
Arguably, copper had lost its luster before the pandemic. But economic shutdowns early in the year put additional pressure on demand for the industrial metal. Since then, supply chain disruptions and gradually rising demand as economic activity resumes have burnished the patina and copper is shining again. With roughly half of annual copper sales to China, the recent rebound has been supported by resurging demand in China’s property market—as well as global recoveries in automobiles and appliances sales. China’s official manufacturing PMI read 51.1 in July and 51.0 in August (readings above 50 generally indicate expansion). Meanwhile, on the supply side, labor disputes in Chilean mines and production issues at a large Utah mine have pressured production.

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