How Commodity Prices Inflated Globally, Then Lost Some Heat

The price of crude oil fell below $100 a barrel on Tuesday, belying forecasts made even before the war in Ukraine that it could rise above $150. The price of wheat has fallen more than $1.70 a bushel from its March 7 high, while soybean and palm oil have marked gradual declines from levels a week ago, according to the latest trends in global commodity futures.

Global market reports suggest that the commodity market, which has become unstable due to the Russian-Ukrainian war and Western sanctions, is cooling down a bit.

With crude oil being the second most important after cotton in the import basket, Bangladesh should get some relief in future transactions as the state oil monopoly has reserved diesel at $129.14 a barrel on March 11, down from $176 two days ago.

Can take months for LPG price drop

But it may take months to see the impact on liquefied petroleum gas (LPG) prices, the owner of a major local LPG company said, while welcoming the downward price trend crude.

Commodity traders expressed cautious optimism that the latest trend in future global trade will last, as supply issues persist with Russia’s war in Ukraine raging and Western sanctions in place.

Local wholesale prices of some commodities, including edible oil and wheat, have registered declines over the past two weeks due to tax and duty exemptions at import and domestic sale levels. detail, they said.

Oil futures have lost around 20% since closing at their highest since 2008 a week ago after a tumultuous period of wild price swings.

Azam J Chowdhury, chairman of East Coast Group and director of Omera Petroleum Limited, told TBS that it will take months to see any reflection of falling global crude oil prices in the Bangladesh market.

But the good news is that the price of oil has started to fall in the global market, he noted.

Due to record high oil prices, Bangladesh Petroleum Corporation suffered losses of up to Tk 80 crore per day. The company won’t benefit from lower prices anytime soon as it mainly imports refined oil, which is still $120 a barrel according to Monday’s data.

Meanwhile, turmoil in the global wheat market has eased somewhat, with supplies from Russian ports continuing, albeit in lower numbers than the previous week, according to a Bloomberg report.

But there are warnings that the situation could change as the war shows no immediate signs of ending and the Russian army was “closer to kyiv”.

Closed ports, new China lockdown, new concerns

Ukraine’s ports, known as the world’s breadbasket, are still closed and news of new Covid-19 lockdowns in China have come as new concerns.

As the world faces slowing growth and soaring consumer prices, Europe risks stagflation as gas prices tripled amid panic over future supply.

Global commodity price indices are already 26% higher than at the start of 2022. Crude oil is still at levels that are difficult for the global economy to absorb.

Market data analyzed by The Business Standard indicates that six major import products marked declines, or at least plateaued from their recent highs after the Russian attack on Ukraine cut off supply via the Black Sea and trade sanctions against Russia.

Palm oil fell more than $260 in a week to $1,433 a tonne yesterday, while wheat traded at $11.24 a bushel (27.2 kg). Cotton has marked declines since March 11.

Traders hope for stable prices during Ramadan

Local traders, however, are not optimistic about the downward trend in the global market, but hope that local market prices will not experience wild swings during Ramadan if the global situation does not worsen.

They attributed the fall in wholesale prices of some products to the exemption of VAT and duties, and not as a reflection of the global trend.

Palm oil saw the biggest drop, down Tk 900 per maund (40.9 litres) to Tk 5,100 and soybeans fell to Tk 6,200 per maund, down Tk 800 from a year ago. a few days. Sugar and chickpeas, two of the most demanded items during Ramadan, fell by Tk 100 and 200 per maund. The price of wheat also fell slightly, 50 Tk per maund for the Indian variety and 70 Tk for the Canadian wheat.

“Prices fell after the government removed VAT, not because of the global price trend,” said Ashutosh Mohajan, owner of Koli Traders, a Chattogram-based commodity wholesaler.

Tareque Ahmed, director of major commodity importer TK Group, said the price declines seen in the global market over the past two or three days do not indicate any vital change. “World prices go up and down like this. You can’t predict anything with certainty,” he told The Business Standard.

However, he said there are sufficient stocks of the main food items for Ramadan and local market prices are not expected to experience major fluctuations if the global market does not become volatile.

To curb soaring commodity prices in the market, the government removed VAT on the production and distribution of soybean oil. The National Revenue Board was also tasked with imposing a minimum duty on imports of other basic necessities, including wheat and sugar.

However, such measures have not yet had an effect on the country’s market.

Traders say they are selling everyday staples, including oil and sugar, at prices set by the Commerce Ministry despite a surge in the global market.

Biswajit Saha, executive director of City Group, the country’s largest consumer goods maker, said the ministry would readjust prices in the domestic market as VAT on basic necessities has been removed. And there will be a new downward readjustment following a global fall.

“The international market has stabilized somewhat over the past two or three days, which is good news for us. When prices go down, it’s good for both importers and consumers. But we are now struggling to cope with the already rising prices,” he added.

There has been a crisis in the production and supply system. We don’t know when this will be normalized, he added.

The price of wheat in Bangladesh has not risen as much as it did on the world market a week ago, said FH Ansarey, chairman of ACI Agribusinesses – another major consumer goods company.

Price fluctuations in the international market occur according to commodity exchanges. But that’s not the case in Bangladesh, he also said, explaining that traders here open a letter of credit, import raw materials, go into production, and then set product prices.

That is why it will take time to adjust prices, he noted.

Stating that price stability in the international market is a matter of relief, he said traders can now open LCs at lower prices.

But it will be difficult to control raw material prices with high transport costs, added FH Ansarey.

About Natalee Broderick

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