Pakistan Commodities: Swimming against uncertain tides, (AKD Daily, Jul 08, 2020)
AKD Daily
Pakistan Commodities: Swimming against uncertain tides
- Gradual re-opening of global economies as social costs subside and macro fundamentals recover, reflecting on commodities with TRJ index +5.2%MoM, building upon gains from May’20 (+13.0%MoM). However, regional disparities in number of new COVID cases limit economic recovery on a global scale.
- This is evidenced from projections by major forecasting agencies. IMF has revised down its global GDP contraction forecast for 2020 to –ve 4.9% from –ve 3.0% in Apr’20. Moreover, a much larger retreat in developed (–8.0%) than emerging economies (–3.0%) is estimated.
- Global crude benchmarks moved starkly higher (Brent/Arab Light climbed 13.5/50.4%MoM) to average US$40.0/35.1/bbl for the month of June’20, underpinned by OPEC+ member countries adhering to planned output curbs (106% compliance in June’20 vs. 85% in May’20 according to Platts).
- FAO price index avg. at 93.2pts in Jun’20, +2.4%MoM reversing the declining trend witnessed since the beginning of CY20 helped by sharp increases in vegetable oils, sugar and dairy products while meat and cereals continue their south journey.
- Pace of reopening of business activities are likely to dictate prices with questions over “second wave” and “infection peak” fueling uncertainty over the shape of any recovery. Rise in energy prices are negative for Pakistan, with demand for exported agriculture products (including meat, fruits, vegetables, rice) having to find new markets due to global trade dislocations.
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