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The Impact of Global and Domestic Developments on the Commodity Markets

Proshare

Friday, March 03, 2017 12:47 AM / FDC

In the just released NBS data for Q4 2016, the agricultural sector expanded by 4.03% and 4.11% full year 2016.

The Impact of a slowing GDP and a growing agric sector is that we expect a gradual decline in the rate of inflation.

In this week’s commodity report, the FDC Think Tank summarises the impact of global and domestic developments on the commodity markets.

Burning Economic Issues
• Nigeria now self sufficient in cement – total output at 22mmt

• Headline inflation expected to slide marginally to 18.5%

• OPEC secretary general and team visits Nigeria

• Output cut exemptions for Nigeria extended

•Parallel market trading at N445/$, IFEM at N305/$

• CBN intervention mainly addresses invisibles

• Diesel still trading at N270/ltr


Economic News

The Good
• More reforms expected as fundamental improve

• Short term naira outlook positive

• Power at the grid now 4000MW – up 166% from measly 1500MW

• Oil prices still above $56/b

• Gross external reserves heading towards $30 billion


Domestic Commodity Prices





Stock Market
• NSE ASI 0.58% (25,183.10pts)

• Mixed sentiment of reforms and weak earnings  



Oil prices
• Brent crude down 1.06% to $46.66pb

9.19% lower than October’s average of $51.38pb

• U.S crude stockpiles to swell by 3.6mb – API


• Market softness ahead of OPEC meeting

• U.S gasoline exports up 35% - highest since 2010

Oil markets today



Outlook – oil prices

• Oil prices threatened by US stock pile up

• OPEC reports semi-compliance to output cut deal by non-members

• Posing a leakage to OPEC agenda to rebalance market

• Iran has expressed its hesitation to take part in further OPEC deals beyond FH’17

• These factors pushing resistance level of oil prices down

Outlook – agric prices   

 

Grains

·         US wheat harvest to fall at its fastest in 26 years, supporting possible price rally

Soft

Sugar

Anticipated strong supply threatening price rally

Cocoa
• Idle cocoa stock wasted due to lack of demand

• Likely to taper price decline in the short-run


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3.      Increasing Consumer Resistance and Declining Income Is Taking Its Toll on Retail Prices

4.      Consumer Effective Demand Negatively Affected By Festive Spending

5.      Domestic Commodity Prices Have Reached Their Peak

6.      Prices of Christmas Sensitive Staple Foods Remain Sticky Downwards

7.      Domestic Commodity Prices Oblivious to a Falling Naira

8.     Domestic Food Prices May Have Reached a Plateau as Consumer Resistance Bites Harder

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10.  The China Futures Association Signs MoU with Intnl’ Commodities & Derivatives Assn

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12.  Oil Price Slips on OPEC Deal Concerns; Price of a Bag of Rice is Tapering

13.  Rise in Crude Oil Price to Boost Nigeria’s Revenue by 8.7%

14.  Commodity Prices Remain Relatively Unchanged

15.   Domestic Commodity Prices Tick Upwards In Spite of Expected Harvests

16.  Naira Depreciates to N407/$ in the Parallel Market; Impact on Imported Commodities to be Felt in Sep

17.   Consumers Are Resisting Price Increases in the Retail Market - FDC

18.  Continuing Slide of the Naira Leading to Higher Prices of Inelastic Commodities

19.  Receding Weather Shocks Hand baton to Fundamentals

20. Domestic Commodity Prices Remain Fairly Stable

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