A gauge of soft commodity returns just capped its longest run of weekly losses since May 2017 as signs of ample supply of coffee and sugar collide with demand concerns.
Escalating US-China trade tensions are fanning recession fears that are rippling through financial markets. In the case of cotton, price-supportive weather is being undermined by concern that new US tariffs on imports of Chinese textiles will push up costs for consumers and erode fibre demand.
“The backdrop for commodities has deteriorated in July-August as multiple headwinds buffet the global macroeconomic outlook,” Fitch Solutions analysts said Friday in a report. “As a result, we remain neutral on most commodities over the rest of the year, in particular towards industrial metals and most agricultural commodity prices.”
It’s not all doom and gloom though. The sugar market’s forecast shift into deficit is supportive of prices, according to Citigroup. The recent price pullback in both coffee and sweetener present buying opportunities for users, Aakash Doshi, director of research at the bank said in a note this week.
© 2019 Bloomberg L.P.