However, the agricultural commodities sub-index emerged the top performer in the quarter; thus, growing more than the gains achieved in base and precious metals.
According to the report, the highlights of the AACI for Q3-2020 are as follows:
- Energy sub-index fell by 8%, largely as a result of oil price fluctuations.
- Agricultural commodities sub-index rose by 13%, partly as a result of favorable weather conditions in the major producing countries.
- Sugar prices gained based on the strong expectations of firm import demand from China and fears that Thailand’s crop could shrink in 2021 following a drought.
- Cocoa futures enjoyed a pre-election premium in Ghana and Côte d’Ivoire.
- Cotton rose to its highest level since February 2020, as a result of the threat of Storm Sally on the US cotton harvest, coupled with poor field conditions in the US.
- Coffee rose by 10% as La Nina weather conditions in Vietnam, the world’s largest producer of Robusta coffee, raised the possibility of a shortage in exports.
- Base metals sub-index rose by 9%, due to several factors including ongoing supply concerns for copper in Chile and Peru and strong demand in China.
- Precious metals sub-index rose by 7% in the quarter, as the demand for haven bullion continued in the face of persistent economic challenges triggered by COVID-19 and heightening geopolitical tensions.
- In addition, Gold enjoyed record inflows into gold-backed exchange-traded funds (ETFs), which offset major weaknesses in jewelry demand.
What they are saying
According to Dr. Hippolyte Fofack, Chief Economist at Afreximbank, “Commodity prices in Q3-2020 have largely been impacted by COVID-19. The pandemic has exposed global demand shifts that have seen the oil industry incur backlogs and agricultural commodity prices dwindle in the first half of the year.
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“The outlook for 2021 is positive — however conservative the markets are. We hope to see an increase in global demand within Q1 2021 and Q2 2021, buoyed by the relaxation of most COVID-19 disruptions and restrictions.”
What you should know
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- AACI is a trade-weighted index designed to track on a quarterly basis, the price movements of 13 different commodities that are of interest to Africa and the Bank.
- To effectively mitigate risks associated with commodity price volatility, AACI highlights areas requiring pre-emptive measures by the Bank, its key stakeholders and policymakers in its member countries, as well as global institutions interested in the African market.
- AACI highlights the generally conservative market sentiment with consensus forecasts predicting prices to stay within a tight range in the near term, with the exception of crude oil, coffee, crude palm oil, cobalt, and sugar.
- African Export-Import Bank (Afreximbank) is a pan-African multilateral financial institution with the mandate of financing and promoting intra-and extra-African trade — owned by African governments, the African Development Bank, and other African multilateral financial institutions, as well as African and non-African public and private investors.