Thursday Briefing: Pakistan Has a Wheat Problem

July 14, 2016

Wheat, cotton and corn are dominating the commodity list on Sentifi, with news coming from all over the world. Pakistan is facing difficulties in wheat imports and exports. South Africa may not be able to meet domestic corn demand. And the markets seem to be concerned about rice as it may be a catalyst for a global food crisis. Read on to learn all the commodity buzzes on Sentifi.


1/ Wheat: Pakistan is cut off from international wheat market

Pakistan finds itself in a difficult situation due to its own doings. The country has high procurement prices which make exports uncompetitive, and has a high tariff which prevents imports. Worse, Afghanistan, one of the biggest wheat importers of Pakistan, has increased the custom duty on the wheat flour, which led to the suspension of the export of wheat flour from Pakistan to Afghanistan. About 800 flour mills in Pakistan are affected and have been shut down.

2/ Cotton: Prices jump to a new high

Cotton prices is increasing by leaps and bounds, but will it crash?

An increase in international lint prices and local shortage have boosted cotton’s prices 13% in the last three trading days. That is the highest level in two years that cotton’s prices have reached as traders have to buy cotton in bulk to replenish their stocks due to better demand outlook, a decline in inventory level and a reduction in supply.

3/ Corn: South Africa may not be able to meet demand

South Africa is set to produce the smallest maize crop this year since 2008, which is further complicated by its inability to import enough of the white variety this season to meet demand. Head Economist Wandile Sihlobo of the Agricultural Business Chamber even worries that the country may not be able to see the forecast 1.1 million tonnes of corn by the end of the season.

4/ Rice: Production levels spark worry of global food crisis

The global production of rice will decline for the first time in six years despite the steady increase of the global population. This causes fears about disastrous results that affect Asia and emerging markets around the world that use rice as a staple food. In short, India, the Philippines, Vietnam, Thailand, and the rest of South East Asia will be impacted.

5/ Uranium: Investors say it’s a good time to invest 

The commodity has been the cheapest since May 2005 because the market is still struggling to fully recover from the Fukushima disaster of 2011. That said, the industry may see a pickup soon as more nuclear reactors are being built around the world. The current price of uranium is $26.50/lbs, and is predicted to reach $34.60/lbs in the fourth quarter of 2016.

6/ Copper: China’s June imports declined on a monthly basis

China is importing less copper on a monthly basis, but more copper year over year.

The most populous country happens to be the world’s largest importer of copper ores, anodes and refined copper, and the global miners see their profits fluctuate in conjunction with China’s demand. For June, China’s copper imports declined for the third consecutive month on a monthly basis. But, when putting it into a year-over-year basis, June imports actually increased by 20.3%. So in a bigger picture, China’s copper imports are growing year over year, defying speculations of a slowdown.

7/ Steel: China receives warning about steel production

President of the European Commission Jean-Claude Juncker has officially demanded China to close down steel mills that are dumping excess production in Europe if the country doesn’t want to get blocked from the World Trade Organization. This drastic measure is how Juncker is trying to defend the EU’s steel industry as overcapacity in steel production is a serious problem for Europe.

8/ Sugar: Sees movement in India, Brazil and Zambia

Zambia is moving forward with sugar production that will help it tremendously in the sugar market.

Brazil’s sugar production is expected to exceed last year, with 35.2 million tonnes compared with 31.2 million tonnes. In the meantime, India’s sugar output may fall 7% this year, and Zambie has inaugurated a new fully-functional sugar plant to more than double the country’s sugar production capacity.

9/ Soybean: U.S. farmers are cautious about the summer

The summer’s weather in the U.S. will be critical as a small drop in yield caused by the weather could change the price situation quickly.

10/ Coal: China adding more coal-fired plants despite overcapacity

Though the Chinese government has pledged to slow down the approval of new coal-fired power plants because of overcapacity, many projects have already been in the pipe, which translates to one new coal-fire plant a week until 2020.

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