Livestock prices: The top 10 most important drivers

This is the second in a series of articles looking at the top 10 most important drivers behind some of the main commodity futures prices. Episode 2 looks at livestock.

1) Feed prices


snake.eyes / Foter / CC BY-NC-ND

If feed grain prices increase (so that total input costs rise) the cost of raising livestock also goes up, reducing margins for farmers. Rather than feed cows, pigs and chickens at flat to negative operating margins, livestock owners may opt to slaughter more of their herd instead.

This then supplies the market with excess meat and drives prices lower in the short-term. In the long-term, equilibrium in operating margins is restored by either greater supply of feed grains driving input prices lower or decreased livestock production increasing market prices.

read more

Sugar prices: The top 10 most important drivers

This is the start of a series of articles looking at the top 10 most important drivers behind some of the main commodity futures prices. Episode 1 looks at sugar.


howzey / Foter / CC BY-NC-ND

1) The Brazilian Real

Brazil is the largest producer of sugarcane, producing around 740 Mt in 2013, almost 40% of global output. A decline in the value of the Brazilian currency, the real increases the incentive for Brazilian farmers to increase output for export while at the same time reducing their production costs.

Millers in Brazil can crush sugarcane to make ethanol for the domestic fuel market, priced in reals, or sugar for export, priced in dollars. A decline in the value of the real versus the dollar encourages Brazilian producers to divert more to the export market.

read more

Iran nuclear deal: 4 key implications for commodity markets

1) Lower oil prices

Brent crude prices fell around 2% following the announcement of the deal. However, it may not be until early 2016 until we actually see any additional Iranian crude being exported.

The medium term impact will depend on the when sanctions will be lifted and then how quickly Iran can raise oil production. Sanctions are likely to remain in place until the end of the year when the IAEA published a report on Iran’s compliance with the terms of the deal.

At this point it may be possible for Iran to begin selling the crude it has stockpiled offshore, somewhere between 30 and 50 million barrels. Although this could come to the market very quickly, it wouldn’t be in Iran’s interest to just dump this.

read more