International Monetary Fund October 2012

Commodities Market

Developments and Outlook

Prakash Loungani Research Department

IMF Commodity Price Index (2005=100)

Base Metals: Quarterly Demand Growth Contributions (percent)

1/ NIEs = Newly Industrialized Economies (Hong Kong SAR, Singapore, South Korea, and Taiwan PoC). Sources: IMF, Primary Commodity Price System; World Bureau of Metal Statistics; and IMF staff calculations.

Setbacks to the global recovery, particularly in EMs, led to falling commodity prices in Q2, but Q3 was marred by supply shocks

1

Average Petroleum Spot Price 1/ (U.S. dollars a barrel)

1/ Simple average of Brent, Dubai Fateh and West Texas Intermediate spot prices. Sources: Bloomberg, L.P.; International Energy Agency; and IMF staff calculations.

After a drop in Q2 on the back of increased OPEC production, oil prices have rebounded in Q3 as the market tightens again

OPEC Spare Production Capacity and Inventory (million barrels a day)

2

Prices of Major Crops (indices, January 1, 2007 = 100)

Global Food Stock-to-Use Ratios (inventories as a percent of global consumption)

Sources: Bloomberg, L.P.; U.S. Department of Agriculture; and IMF staff calculations.

Supply disruptions for key crops led to higher food prices, and despite some recent relief, risks are tilted to the upside

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-0.50 -0.25 0.00 0.25

Latin America

United States

CIS 3/

Euro Area

Japan

China

Dev. Asia ex China

Africa

Middle East

CCA 2/

Corn Wheat Rice Soybeans Other

0 20 40 60 80 100

Rice

Other

Wheat

Soybeans

Corn

First-Round Impact on Trade Balance (percentage points of GDP; shaded in blue is 2007-08 level)

Sources: Bloomberg, L.P.; UN COMTRADE; IMF, World Economic Outlook; and IMF staff calculations. 1/ Annualized 2011-12 price change (year-over-year) minus October 2010 WEO forecast. 2/ Caribbean and Central America. 3/ Commonwealth of Independent States.

But the current price spike is less severe, with smaller associated trade balance losses and gains relative to 2007-08

0 20 40 60 80 100

Rice

Other

Wheat

Soybeans

Corn

2011-12 Food Price Shock, Annualized 1

(percent; shaded in blue is 2007-08 level)

4

Rising food prices raise overall inflation more in EMDCs than in AEs, with large variation across regions.

Food CPI Inflation by Region 1/ (year-over-year percent change, NSA)

Contribution of Food to Headline Inflation (percentage points)

Sources: Haver Analytics; IMF, World Economic Outlook; and IMF staff calculations. 1/ Some indices include non-alcoholic beverages. Data are aggregated using PPP weights. 2/ Central and Eastern Europe. 3/ Commonwealth of Independent States.

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Impact on Commodity Exporter Growth (percentage point reaction to 1 percentage point slowdown)

Peak Impact on World Metal and Rubber Prices (percentage points, SAAR; one-standard-deviation shock)

Source: IMF 2012 Spillover Report 2012.

Slowdown in China’s investment growth would have significant impact on commodity exporters’ growth and commodity prices

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Significant Not significant

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Prices are expected to moderate in the absence of further supply disruptions, but risks are still tilted to the upside

Brent Crude Oil Price Prospects 1/ (U.S. dollars per barrel)

Corn Price Prospects 1/ (U.S. cents per bushel)

Sources: Bloomberg, L.P., and IMF staff calculations. 1/ As of October 9, 2011.

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Thank You

http://www.imf.org/external/np/res/commod/Commodity_Market_Review1012.pdf

http://www.imf.org/external/pubs/ft/weo/2012/02/

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Output and Inflation – Emerging Markets and Developing Economies

Output (Real GDP Growth)

Inflation (Consumer Price Index Change)

Sources: IMF, World Economic Outlook, October 2012 9

2012 2013

China 7.8 8.2

South Africa 2.6 3.0

Mexico 3.8 3.5

Brazil 1.5 4.0

Argentina 2.6 3.1

India 4.9 6.0

Indonesia 6.0 6.3

Russia 3.7 3.8

Turkey 3.0 3.5

Saudi Arabia 6.0 4.2

Hungary -1.0 0.8

Estonia 2.4 3.5

Iran -0.9 0.8

Poland 2.4 2.1

Thailand 5.6 6.0

Egypt 2.0 3.0

Colombia 4.3 4.4

EMDEs 5.3 5.6

2012 2013

3.0 3.0

5.6 5.2

4.0 3.5

5.2 4.9

9.9 9.7

10.2 9.6

4.4 5.1

5.1 6.6

8.7 6.5

4.9 4.6

5.6 3.5

4.4 3.2

25.2 21.8

3.9 2.7

3.2 3.3

8.6 10.7

3.2 2.8

6.1 5.8

0 20 40 60 80 100

Rice

Other

Wheat

Soybeans

Corn

0 20 40 60 80 100

Rice

Other

Wheat

Soybeans

Corn

2011-12 Food Price Shock, Annualized 1/ (percent; shaded in blue is 2007-08 level)

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Africa, Central America, Caribbean, and Middle East are most vulnerable amid low inventory and high import dependence

Sources: Bloomberg, L.P.; UN COMTRADE; IMF, World Economic Outlook; and IMF staff calculations. 1/ Annualized 2011-12 price change (year-over-year) minus October 2010 WEO forecast.

-0.50 -0.25 0.00 0.25

Latin America

United States

CIS 2/

Euro Area

Japan

China

Dev. Asia ex China

Africa

Middle East

CCA 1/

Corn Wheat Rice Soybeans Other

First-Round Impact on Trade Balance (percentage points of GDP; shaded in blue is 2007-08 level)

Sources: Bloomberg, L.P.; UN COMTRADE; IMF, World Economic Outlook; and IMF staff calculations. 1/ Caribbean and Central America. 2/ Commonwealth of Independent States.

Africa, Central America, Caribbean, and Middle East are most vulnerable amid low inventory and high import dependence

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