Overall, commodity prices rose in August. The energy price index increased by 8.8 percent in August, primarily due to rising natural gas prices (10.1 percent) and crude oil (5.7 percent). The index of non-energy raw materials rose by 2.3 percent.
Agricultural product prices increased by 1.7 percent, with food prices rising by 1.4 percent, beverages by 2 percent, and raw materials by 2.2 percent. Fertilizer prices slightly fell by 1.9 percent. Metal prices rose by 4 percent, led by zinc (7.7 percent) and copper (5.8 percent). Precious metal prices recorded a strong increase of 8.8 percent, driven by rising silver prices (11.2 percent) and platinum (9.7 percent).
The Bloomberg agricultural index (a diversified basket of grains, oilseeds, meat, and soft products) rose by 12.4 percent in August, marking its best month since April 2021. The strength was incredibly broad-based; 19 out of 25 agricultural futures markets ended the month in the positive.
The drivers of such growth were the strength of crude oil, halted export flows from the Black Sea, lower corn yield expectations in the US, flooding in the US corn belt, strong soybean purchases by China, and a weaker US dollar. Hedge funds covered short positions and added new long positions across the complex.
Markets Await Inflation Data and FED Decision
The end of the week ahead will be particularly interesting as we expect inflation data from the US on Friday. All of this comes ahead of the FED’s interest rate decision next Wednesday. Markets currently estimate the probability of an increase at 58 percent, which would be the first rate hike by the FED since July 2023.
Central banks are buying gold at a pace not seen in generations. Not merely as a routine move, but as protection against currency risk associated with the dollar. BRICS countries are building payment systems that bypass the US and the dollar. A multipolar world is no longer just a theory, but is reported in the media every week. And gold quietly occupies a central place in all of this. Alongside it, silver and Bitcoin keep pace, even outperforming its performance. Silver is more valuable in industrial terms, while Bitcoin is faster and scarcer.
Escalation Between the US and Iran Raises Energy Prices
Brent crude oil prices are approaching the $100/bbl level after rising 9.3 percent last week, as escalating tensions between the US and Iran have sparked fears of prolonged disruptions in energy supply through the Strait of Hormuz. The US announced that it attacked three Iranian oil tankers over the weekend, destroying one, in retaliation for ballistic missile attacks on US Navy warships. Iran responded by threatening to establish a new limited zone outside the strait, reportedly extending from the US Navy’s blockade line to parts of the Persian Gulf.
Tehran also claimed to have targeted three tankers, although reports cannot be independently verified. US Energy Secretary Chris Wright stated that Washington would maintain its naval presence and blockade, aiming to limit Iranian oil exports while supporting the safe passage of commercial vessels. Wright previously stated that millions of barrels of crude oil continue to move through the Strait of Hormuz despite the escalation of conflict.
Consequently, European natural gas prices also surged to €73/MWh, their highest level in over three and a half years. The ongoing escalation of interactions raises concerns that Qatari LNG deliveries to Europe could be further delayed. Europe is nearing the end of the summer gas injection period, and gas storage is currently filled to about 62 percent, below the five-year seasonal average. This increases the risk of stronger competition for supply and leaves the region more exposed to sharp price increases during the colder months.
The US CBOT is closed today for Labor Day, but crude oil is recording gains after the US and Iran exchanged attacks over the weekend, suggesting that energy will remain a supportive impetus for agriculture this week. Market focus will be directed towards the USDA WASDE report for September, which will present updated estimates for corn and soybean yields in the US. Additionally, the market will monitor headlines regarding Russia and Ukraine, early harvest results in the US, Chinese demand, final weather conditions in the Corn Belt, and early forecasts for Brazil as the planting season approaches in South America.
The battle for agricultural commodities is taking place on the Black Sea chessboard. If shipments from Russia and Ukraine remain blocked or nearly blocked over the next two months, the consequences will be enormous. The Black Sea, which has long been a key artery for global transport of grains, oil, and bulk cargo, has become one of the most dangerous commercial shipping routes in the world. Meanwhile, the FAO food price index has reached its highest level since 2022.
Copper Near Record Levels, Supply Concerns Rise
Copper prices fell at the start of the new week to $14,550/t, as US employment data, which was stronger than expected, bolstered expectations for a FED interest rate hike this month, impacting demand prospects for industrial metals. Investors also assessed rising inflation risks after oil prices continued to rise as the US and Iran exchanged blows on ships over the weekend.
However, copper remained near record levels amid ongoing supply concerns. Analysts highlighted a recent export ban in Congo, weaker production from major producers Chile and Peru, and disruptions related to El Niño. Data showed that leading producer Chile recorded its weakest production in the second quarter in at least 19 years. The country has also lowered its full-year production forecast for the second consecutive quarter and now expects a production decline of 2.6 percent.
Additionally, uncertainty around tariffs continues to drive copper deliveries to the US, pushing inventories on Comex to record levels. Morgan Stanley predicts a potential first annual decline in global copper supply from mines since 2017. At the same time, copper prices are hovering near historical highs. The world is feverishly searching for supplies and more mines are needed. Silver, a byproduct of copper production, faces an even greater shortfall, yet remains 40 percent below its highest value. What offers greater growth potential?
