Prices of energy and other commodities have risen worldwide at a faster rate than forecast. Energy prices are on average 80 per cent higher than last year, and food prices rose by up to 30 per cent on average early this year. They have eased somewhat, but it will take more time for the situation to return to normal. The findings come from the World Bank's quarterly Commodity Markets Outlook, published on Thursday.

The report says crude oil averaged $70 a barrel this year and may average up to $74 next year. It forecasts that commodity markets will stabilise next year.

In the report, World Bank chief economist Ayhan Kose said the rise in energy prices would soon create a significant risk of inflation worldwide. If prices keep rising, pressure will grow on countries that depend on energy imports. Commodity prices that fell because of the coronavirus are now rising very fast, and unstable prices will add pressure on countries' policymaking.

The report says some commodity prices this year were higher than in 2011. Natural gas and coal prices hit record highs because of inadequate supply, and electricity demand has returned to pre-pandemic levels, pushing up demand for energy. If demand normalises in 2022, prices will stabilise. But the report warns that energy prices could rise further if natural gas stocks fall and supply does not return to normal.

The forecast says crude oil (Brent, WTI and Dubai) may average up to $70 (about Tk 6,000) this year and $74 (about Tk 6,300) next year. After the pandemic began, oil prices fell rapidly on the world market and at one point turned negative for lack of demand. This year prices have recovered by up to 70 per cent on last year's average.

World Bank senior economist John Baffes said high energy prices add to inflationary pressure. Higher energy prices also raise the cost of producing fertiliser, and so the cost of growing crops. Rising production costs have already cut the output of aluminium and zinc.

Analysing agricultural markets, the report says prices early this year were about 30 per cent higher on the world market than a year earlier, after collapsing last year because of the pandemic. Agricultural markets have been broadly stable over the last two quarters, but prices are still 25 per cent higher on average than last year. The markets are returning to pre-pandemic conditions, and the food price index is now at its highest in eight years.

Maize has eased slightly very recently but is still 25 per cent dearer than last year. In May a tonne of maize climbed as high as $300, mainly because of lower production and higher demand for animal feed; in September it fell to $230. Supply shortages pushed rice to a seven-year high early this year, but it fell 18 per cent in the last quarter, and a tonne of rice now averages $406 on the international market.

Edible oil prices have eased slightly but are still 40 per cent higher than last year. In the April-June quarter palm and soybean oil prices reached their highest in 10 years, mainly because soybean production fell in South America and palm oil production fell in East Asian countries. China also sharply increased its soybean imports. With supply inadequate, edible oil prices jumped.

Source: Jugantor. First published in Bengali on The Agro News.