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.
“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
- 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.