Global uncertainty continues to pressure commodity prices

Santo Domingo, DR

Almost two years after the pandemic of the Covid-19 coronavirus in the global economy, at a time when international trade was already declining, the prices of raw materials (Commodities), natural phenomena in grain-producing countries, and the dismantling of ships continue to put pressure on prices, not only of raw materials but of intermediate and finished goods.

The Dominican Republic, a Caribbean nation that shares a quarter of the island with the poorest country in the Western Hemisphere, is no exception to this situation. Even though Law PL 480 prioritized imports of agricultural goods from the United States, it is forced to generate food for more than 10 million inhabitants, most of them Haitian neighbors and tourists.

According to official figures, the country buys 90% of the local production or manufacture of food and non-food goods.

While this is happening, experts from organizations such as the International Monetary Fund (IMF), the Food and Agriculture Organization of the United Nations (FAO) warn of the maintenance of price escalations due to various external factors. They speak of a price pass-through of up to 20% and a possible break in moderate inflation.

Currently, the Dominican Republic maintains moderate inflation concerning its peers in the region and even lower in August than months ago, which placed the Consumer Price Index (CPI) at 10.48% in May of this year, compared to the same month of 2020. Last August, year-on-year inflation was lower, at 7.90%, mainly impacted by the price of chicken, onions, and other seasonal items.

Commodities

The warnings of international organizations are due to the behavior of the Chinese economy, whose demand is expected to be lower; to the emergence of new strains of Covid-19 and scarce vaccination in food and raw material producing countries; and to the upward behavior of the prices of oil and its derivatives, including natural gas and coal.

In Europe, energy prices are expected to increase due to a rise in natural gas. In addition to increases in the value of fuels, there are increases in sugar, wheat, meat, vegetable oils, and a fertilizer crisis in European countries.

Markets

According to a Bloomberg report, oil was quoted yesterday at US$73.98 per barrel, well above the value budgeted in the DR.

On the rise

Gasoline rose 0.74%, natural gas rose 3.30%, corn 0.47% and wheat 0.84%.

Inputs

International reports indicate an increase in the price of industrial ammonia.