Key themes
In the coming months main focus of commodity markets will be on whether the Federal Reserve will hike its policy rate and the impact this will have on Emerging Markets and in particular China. Although the economic situation seems to be stabilising both in the US and in China following a string of weak key figures, uncertainty is likely to continue to plague commodity markets in the near term. In 2016, stronger growth in developed economies should mitigate lower Chinese growth and support demand for commodities.
Oil
We expect a rebalancing of the oil market to take place next year, which should lead to a recovery in the oil price. In the near term US rate hikes, uncertainty regarding the state of the Chinese economy and the warmer North American winter weather will weigh on prices. There is an upside risk to the oil price from a deterioration of the Middle Eastern geopolitical situation. We recommend consumers to hedge 2016 exposure at current levels.
Metals
Stronger global economic growth, a recovery in the oil price and a continued rebalancing of supply should lead to an increase in base metal prices next year. In the near term uncertainty regarding the state and outlook for China's economy will continue to be a headache for this market. We recommend consumers to hedge 2016 exposure.
Grains
Production remains strong and the worst El Niño risk is over now. A higher oil price next year should support higher grain and oilseed prices, while the higher EUR/USD will weigh on European grain and oilseed prices. We recommend consumers to hedge US wheat and soybean exposure in 2016 at current levels.
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