Basic HTML Version
Citi Perspectives for the Public Sector
|
2015 – 2016
45
The current commodity environment, although
depressed, remains volatile: good weather
has helped to boost crops globally in recent
years although it is impossible to predict future
weather patterns, such as the El Nino cycle,
which may reverse this trend. Oil markets have
been hit by price volatility, but low crude prices
have not yet fed through into a large supply
pullback. Macro volatility in global markets will
be ever present, evidenced today in slowing
Chinese growth, the US Dollar interest rate cycle
turn, and renewed economic concerns for Brazil,
Russia and Turkey. Nonetheless risk management
strategies are now being used effectively by
the most prepared sovereign nations, to create
greater price stability when making significant
commodity-related decisions.
Exporter and importer nations, most notably
in Latin America and Africa, have been setting
up financial hedging programs to hedge oil
exports, fuel import costs and agricultural
commodity imports. Elsewhere, for example,
in Asia, government-owned stabilisation funds
have historically helped to subsidise oil or
agricultural products domestically.