The World Bank just published its Commodity Market Outlook.
“Most commodity prices are expected to ease marginally in 2013,” they write. “[C]rude oil will average US$102/bbl in 2013, just 3 per cent lower than in 2012. Agricultural commodity prices are also forecast to decline: food by 3.2 per cent, beverages by 4.7 per cent, and raw materials by 2.2 per cent. Metal prices are expected to rise slightly but still average 14 per cent lower than in 2011. fertiliser prices are set to decline 2.9 per cent, while precious metal prices will increase almost 2 per cent.”
Among other things, the report also examines what has driven food inflation, which has been on a tear in the last decade.
According to their econometric models, rising oil prices were the biggest driver followed by the stocks-to-use ratio, which is a measure of the supply-demand balance.
Other significant factors include protectionist trading policies, financial institutions adding commodities to their portfolios, weather, and diversion to biofuels (e.g. ethanol).
The World Bank’s warning: most of the conditions that have driven food inflation are still in place.
Here’s a complete breakdown. Note the far right column, which indicates whether the factor has been a headwind or tailwind to prices.