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Fresh hopes for greater stability in commodity prices

Fresh hopes for greater stability in commodity prices

By Indileni Nanghonga
Senior Research and Product Development Officer at Agribank.

Following a rollercoaster ride in 2020, there are fresh hopes for greater stability in commodity prices.

Metals and energy prices recovered at the end of 2020, tracking the recovery of the Chinese economy. China’s post-Covid-19 stimulus has led to more infrastructure investment and increasing demand for metals. In addition, ensuring food security through a global pandemic has also encouraged the country to boost agricultural imports.

The phase-one trade deal (US and China deal which requires structural reforms in China and trade regime in the areas of intellectual property, technology transfer, agriculture, financial services, currency and foreign exchange) has also played a role in strengthening purchasing power for commodities. Commodity prices are expected to move higher in 2021 based on further economic recoveries and potential for further stimulus. However, Covid-19 lockdowns and travel restrictions remain key downside risks.

Brent Crude: Oil supply cuts coupled with the vaccine rollouts should prove constructive for demand, resulting in a price upside.

Metals: Expected supply disruptions amidst increasing demand could spur prices. Furthermore, Covid-19 has led to a renewed push for a greener future, which should support the current rising price trajectory.

Gold: With its safe-haven status, prices tracked higher in 2020 and are expected to continue in 2021 as a fall in treasury yields and a weaker USD will provide a further boost.

Soft commodities

Agri commodities rallied in 2020 on the back of a Covid-19 food security stance. Fiscal and monetary stimuli created a flow of money out of sovereign bonds, while an increasing number of investors looked to invest in agricultural commodities. Agricultural supply chains have shown an incredible resilience in 2020, with only minor delays at certain ports. Agriculture was mostly spared from the global slump in international trade. However, rising food prices have become a concern. Demand for Agri commodities remain resilient but La Nina will continue to pose challenges for farmers around the globe and the supply chain. In Europe, pork and beef production is expected to decline due to soft confidence, presenting an opportunity for Namibia to expand its beef supply.


The Rand depreciated by 3.2% to the end of January 2021 to R15.15 against the US dollar due to speculation that UK’s new lockdown may spread to the rest of Europe. The Rand is expected to trade below R15/dollar in 2021, reflecting international factors such as the US election outcome, vaccine developments and an abundance of liquidity. A stronger Rand could fare well for importers, but dreadful for exporters and investors with offshore portfolio exposure.

Furthermore, the USD is expected to weaken modestly as interest rates have converged to around zero globally coupled with quantitative easing policies pursued by major central banks.


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