The World Bank has revealed that commodity prices are likely to maintain a good run throughout the year, after a rebound in the first quarter of 2021.

Prices of commodities, overall, performed poorly all through last year due to the economic fallout of the Covid-19 pandemic.

According to the World Bank, commodity prices will trend close to current levels due to the positive outlook and improved growth prospects.

However, this outlook heavily depends on the quick progress of ongoing vaccination programmes across the world as well as policy support measures by governments in advanced economies. This projected outlook also hinges on production decisions in major commodity-producing countries.

The report further indicates that energy prices will average more than one-third higher as compared to 2020 levels, with oil averaging $56 a barrel. Moreover, metal prices are expected to increase by 30 percent; prices of agricultural goods are also forecast to rise by almost 14 percent.

The upsurge in economic activities has driven almost all commodity prices above pre-pandemic levels. Some particular supply-side factors for oil, copper, and some food commodities explain this upsurge.

Ayhan Kose, World Bank Group Acting Vice President for Equitable Growth, Finance & Institutions noted that:

“Global growth has been stronger than expected so far and vaccination campaigns are underway. These trends have buoyed commodity prices. However, the durability of the recovery is highly uncertain.

“… Both commodity exporters and importers, should strengthen their short-term resilience and prepare for the possibility of growth losing momentum.”
Ayhan Kose, World Bank Group Acting Vice President for Equitable Growth, Finance & Institutions and Director of the Prospects Group

Analysis of prices of selected commodities

Following a sluggish growth in 2020, crude oil prices rebounded as demand picked up again early this year. The uptick in prices is supported by a rapid global economic recovery and strategic crude oil production cuts by the Organization of th3e Petroleum Exporting Countries (OPEC) and its partners.

Accordingly, oil demand will remain robust over 2021 owing to the vaccine rollout across the globe, especially in advanced economies. Furthermore, prices may trend on average $60 a barrel in 2022.

However, the report raises caution, noting that a further deterioration in demand could put pressure on prices.

Metal prices, on the other hand, will shed off some of this year’s gains as stimulus-driven growth fades in 2022. The report notes that a quick withdrawal of stimulus by some major emerging market economies could risk decelerating prices.

Nonetheless, this may change as major infrastructure programs in the US could support prices for metals- aluminium, copper, and iron ore.

For Agriculture, prices have fared well, particularly for food commodities, driven by supply shortfalls in South America and strong demand from China.

The report notes that most global food commodity markets remain adequately supplied. As a result such prices may remain stable throughout the year to 2022.

However, there are some downside risks to this stable outlook of food commodity prices. Growing evidence of the effects of COVID-19 on food insecurity may continue through 2021 and 2022. A lot of countries are experiencing growing levels of acute food insecurity, reversing years of reaching the SDGs.