Rising commodity prices and inflation to impact living expense in Q4 2021

At a glance, commodity prices soared in Q3 2021 across multiple sectors, and are expected to increase further in 2022.

Among the major non-energy indices such as agriculture and precious metals is about 30% higher their pre-pandemic levels (March 2020), whereas minerals are about 50% higher.

Compared to the previous quarter alone, energy prices roses by 16% in Q3 2021, favoured by the upward momentum since the start of the year. Specifically, natural gas and coal prices rise much faster than crude oils.

The prices of crude oil averaged $72/barrel in Q3 2021, including the WTI and Brent contracts. This is an increase of 7% on the previous quarter, with higher-than-usual price volatility during the period.

Alongside the rises in commodity prices, rising inflation across developed countries is the central theme at the end of the day. Rising fertilizer prices, food prices and a potential energy crisis ahead of winter in the Northern Hemisphere would have the most impact on the daily life of the average consumer.

Rising Fertilizer Prices & Food Prices

According to the Green Markets North American Fertiliser Price Index, fertiliser prices are currently at record highs and appear set to head even higher.

As fertiliser costs continue to rise globally, governments are increasingly concerned about potential shortages and the impact of rising costs on domestic food production.

The natural effect of increasing fertilizer costs and a shortage in food production is an upward pressure on the prices of agricultural products such as soybean, rice, corn, and wheat. In other words, we are likely to price surges across the spectrum of agricultural products from Q4 2021 all the way to the end of Q1 2022.  

Energy and Oil market Developments

Crude oil prices have risen sharply this year, with Brent reaching a seven-year high. Oil demand has continued to recover, albeit unevenly, and this is expected to continue. Jet fuel consumption remains well below its pre-pandemic level, reflecting still subdued international travel. The price of oil has also been supported by soaring natural gas (GASOIL) and coal prices, which have made crude oil increasingly competitive as a substitute in heating and electricity generation.

After rising 70 percent in 2021, crude oil prices are expected to average $74/barrel in 2022 as global production recovers, while natural gas and coal prices are expected to fall in 2022 as production constraints ease.

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