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Agriculturals used heavily in the hospitality sector lost some ground last month as virus-related lockdowns dented the demand outlook. Esconomists at Capital Economics think that the prices of most of agriculturals will continue to fall in the coming months as supply looks set to rebound strongly.

Agriculturals prices slumped last month

“Despite investors holding onto their net-long positions in futures markets, agricultural prices slumped in March. The price of sugar fell in tandem with a drop in crude oil prices. Although we think that oil prices will rise this year, rising sugar supply will cap gains in sugar prices.”

“Wheat prices fell as favourable weather conditions in Australia, the US and Russia boosted expectations of a bumper harvest in 2021/22 (April-May). We forecast that global production will rise by around 3% in 2021/22, which would add to already-high stocks and continue to weigh on prices.”

“The price of palm oil bucked the otherwise negative trend owing to persistently weak production in major producer Malaysia. And even though soy oil prices also increased last month, the palm-soy oil price spread rose a touch, although it remains far below its five-year average.”