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Agricultural ETPs shine, says ETF Securities

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Last week, ETF Securities writes that agricultural basket ETPs received the largest inflows since inception, totalling USD54.7 million surpassing the previous high achieved only four weeks ago.

The firm writes: “After a lacklustre performance over the prior year with the exception of cotton, a majority of agricultural commodities are trading higher in 2018 owing to severe weather conditions. Wheat prices have been benefiting from the ongoing dry spell in key US growing areas that is hampering the development of the dormant winter wheat.

“While the severe dry conditions in Argentina are supporting soybean and soybean meal prices higher. Meanwhile USDA’s February World Agricultural Supply and Demand (WASDE) report, shows lower closing inventories for corn stocks, lending buoyancy to prices. Added to that the weaker US dollar is also helping the value of dollar-denominated exports in many agricultural commodities.”

Turning to industrial metal basket ETPs, ETF Securities reports that inflows rebounded to USD42.1 million reversing the prior week’s trend of outflows.

“The pronounced US dollar weakness coupled with higher than expected inflation data in the US has lent buoyancy to industrial metal prices. As metals and commodities are viewed as a hedge against inflation. Inflows into Nickel ETPs worth USD21.4 million garner momentum, rising for the sixth week in a row. Nickel was the best performer last week amongst the industrial metals complex, with a price rise of 7.3 per cent.

“The growth associated with electric vehicle batteries is expected to play a role in demand for nickel that currently only accounts for 3 per cent of total demand. Added to that, roughly 50 per cent of the current nickel mine supply is suitable for battery use as the low grade nickel products are inadequate for battery manufacturing, raising the need for further production as global nickel inventories have been trading lower.”

ETF Securities writes that gold ETPs suffered USD103.5 million in redemptions last week, on the back of profit-taking. Gold prices advanced to USD1360 per troy ounce attaining an 18-month high on the back of higher than expected inflation data and weaker retail sales in the US.

Meanwhile, outflows from platinum ETPs continued for the seventh week in a row. According to the European Automobile Manufacturers’ Association, while new car registrations in the EU rose by 7.1 per cent year-on-year, the percentage of diesel cars as a proportion of all new cars registered declined by 33 per cent.

The firm writes that this is likely to weigh on platinum, known for its use in pollution abatement technologies used in diesel vehicles.

Energy basket ETPs faced redemptions worth USD13.2 million, while Oil ETPs saw inflows worth USD21.8 million. In its latest update the International Energy Agency’s (IEA) predicted production increase of 1.8 million barrels per day (bpd) is likely to exceed the anticipated growth in global demand.

“Added to that, owing to the ongoing unscheduled outages in Venezuela, the market would appear to be largely balanced if OPEC’s current oil production at 32.3mn bpd remained constant. However when Venezuela resumes production at normal levels, the oil market will be oversupplied,” ETF Securities writes.

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