Specifically, Jessop see’s Brent Crude Oil dropping back to around $85 a barrel and Copper to $6,000 a tonne. He notes that these forecasts are well below consensus but also above the lows seen during the global recession.
He believes that grain will continue its recent correction and the earlier jump due to the exceptionally hot summer in the US lends to suspicion of another global food price shock similar to that in 2007-08. He notes that more recently the specter if export bans has returned to the radar but he feels that the true picture is “more nuanced and increasingly reassuring.” The price of rice, seen as a staple in much of the developing world is stable and “the global prices of many other important agriculturals, including sugar, coffee and cotton have all fallen sharply this year.”
Furthermore, the prices of US Corn and Soybeans have already started to drop back. US Harvests of both are now largely complete and better than some had feared, with the price of Soybean dragged lower after the release of office stocks in China. He believes that the prospects for US Winter Wheat and S.A. harvests in early 2013 are still uncertain.
Jessop notes the US Dept. of Agriculture’s projections of ample wheat and corn harvests, if still down on last years records whilst Soybeans are on course to be the highest since 2010-11. Additionally, “demand is trending upwards too, but global stock-to-use ratios provide little evidence that the markets will tighten sufficiently to sustain prices at their current high levels.”
Jessop believes that talk of agricultural export bans is overdone and there is a growing consensus that previous action taken by various countries was actually counter productive in the long run. To finish, he notes that “macroeconomic factors remain important drivers of agricultural commodity prices. In particular, further falls in the oil price would add to the downward pressure on grains by lowering costs in agriculture, reducing the demand for bio-fuels and underlying demand for commodities more generally. In summary, higher food price inflation should not be a concern for long.”