The global commodity market has shown great potential since mid-May 2021. With economies re-opening after COVID-19 lockdowns, expectations of high inflation are forcing investors to look towards commodities.
For instance, prices of industrial metals like iron ore, copper, and aluminium have achieved a record high. Mostly because China, the largest consumer, is recovering and transitioning to a future that relies on electric vehicles.
With the stage set for further gains in the not-so-distant future, what are the best commodities for investment in 2021?
Arabica Coffee
Prices for Arabica coffee have been trending high since the start of this year. Prices have been driven higher than usual because of a supply concern from Brazil which is the world’s largest producer. Brazil is facing one of its worst droughts in over a century.
Since the country has now entered a dry time of the year, it’s facing water shortages that will go on to affect agriculture and other industries, too. Out of the several industries that will find it hard to cope because of challenges posed by water shortages, the Arabica coffee industry will be affected, too.
Decreased soil moisture will also affect the crop in 2022. Since Brazil contributes to a third of the global production, decreasing supply will impact the global economy altogether. On the other hand, Columbia, which is the world’s second largest producer of Arabic coffee, is seeing a shortage in supply because of on-going protests.
From an investor’s perspective, this will mean that prices are bound to go up. The high demand will persist, but supply shortages will create distress.
Copper
Investors around the world are now starting to understand the drastic changes the green revolution is going to bring, and how many commodities every country is going to need to play its part. Copper is easily one of those commodities. Not only is it the cornerstone for electric grids, but it is also excessively used in almost every green energy project.
Be it hydroelectric, wind, geothermal or solar, copper plays a vital role. According to a report from Market Insights, Copper is expected to grow at a rate of five percent every year until 2025.
Crude Oil
Technically, it appears as if the prices of crude oil are about to increase, but there is some hesitation in this specific commodity industry. Crude oil observers are fearing the Biden administration striking a nuclear deal with Iran. These concerns, however, are valid because if this deal goes through, the flooding of Iranian oil in the market will have a drastic effect on the price. Previously, Iran was prevented from participating in this market.
That said, the price of crude oil in today’s market still seems to be increasing, and several factors contribute to this. One of those factors is the revival of the Indian economy. India is a massive consumer of crude oil (6% of overall demand). In May, it saw COVID-19 cases reaching a record high, but as these peaks drop precipitously, life is gradually returning to normal.
Conclusion
As the world continues to recover after COVID-19 and the waves of inflation reign supreme, it’s about time you diversified your portfolio and started looking towards commodities. Start your journey with the best commodities to invest in 2021 – you’ll thank yourself later!
