Are we in a new commodity supercycle? asks The Economist. Many raw materials enjoyed strong gains last year, with copper prices up by more than 25% since the start of 2020 and iron ore surging by 75%. China responded to Covid-19 with an infrastructure-led stimulus plan that turned the country into a “voracious importer” of industrial metals and food.
As demand spiked, supply contracted; Covid-19 disruption meant Chilean copper mines and Brazilian iron ore excavators were unable to operate at full capacity. Even energy prices are perking up now: a cold winter has sent Asian liquefied natural gas prices to a record high. Bank of America analysts think the trend will continue, notes Zero Hedge. It says that a cocktail of stimulus, reflation and economic reopening should ensure continued robust commodity demand. Copper could end the year at $9,500 a tonne, up from $7,973 now.
Surging food prices are “one of the most dangerous features” of the latest commodity surge, says Albert Edwards of Société Générale in a note. Grain prices have risen more than 50% in just six months. Droughts in South America have worsened the shortages. As in 2011, a central bank “fire-hose” of monetary stimulus appears to be pumping up agricultural markets. The world’s poor might be about to fall victim to a “price momentum” bubble in basic foodstuffs as speculators pile in again.
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Soya bean and rice prices have also taken off, says Eoin Treacy on fullertreacymoney.com. Corn futures have hit a seven-year high. The 2011 Arab Spring was sparked in large part by “the high cost of bread in Tunisia” during the last major agricultural price surge. Societies are already on edge. Now rising food prices could herald a new round of social unrest.
-
Could your family be at risk of an unexpected tax bill? How to keep your loved ones in the loopMany families are out of the loop when it comes to planning the financial aspects of both retirement and inheritance
-
Rightmove: Glut of homes for sale in southern England drives asking price dropAsking prices are 0.1% lower than a year ago, according to the property website, driven by challenges in affordability-stretched London and the south
-
Small UK industrial stocks are hidden gemsOpinion Ed Wielechowski of the Odyssean Investment Trust highlights three of his favourite British small-cap industrial stocks
-
Aurora Innovation is running on empty – is it overvalued?Aurora Innovation, a maker of self-driving trucks, may have promised far more than it can deliver
-
'Ride the recovery in emerging markets': Gustavo Medeiros of Ashmore Group tells MoneyWeekInterview What's the outlook for emerging markets? Gustavo Medeiros, head of research at Ashmore Group, gives his analysis and reviews progress in developing economies
-
What is the Enterprise Investment Scheme and should you have one?The Enterprise Investment Scheme is tax-efficient and potentially lucrative. Taking a chance on the scheme could trim your family’s IHT bill, says David Prosser
-
The alcohol industry is suffering as consumers sober up – is it still worth investing in the sector?Changing consumer tastes are rocking the alcohol industry, but the best players are adapting their strategies. Buy them while their shares are still cheap
-
A strange calm in creditCorporate bond markets remain remarkably relaxed, with yields that offer little compensation for risks
-
'The City's big bet on green finance fails to pay out'Opinion Insurers and banks are backing away from “green finance”, and there is not much sign of the green boom we were promised. That’s a problem for the City
-
Six top investment trusts for smaller stocksLiquidity constraints mean investment trusts are best placed to seize the juiciest opportunities
