Commodity Price Forecasts: May 2016
Evgeny Ilyukhin | May 05, 2016 08:22PM ET
The article aims to provide forecasts for commodity prices (World Bank’s Pink Sheets) for May 2016. The Pink Sheet is a monthly statistical report on prices of major agricultural commodities, metals and minerals, energy and fertilizers (1960-2016). Monthly prices for the series are published at the beginning of each month. The prices are positively correlated with the futures prices (Column 2 of the Table).
The previous forecasts performed rather well: the Mean of Absolute Errors expressed in percentages was 3.64 while the number of correct trends lowered. Because of both high positive correlation and accuracy of forecasted values it could be recommended to check the values provided in this article. They can be used for identifying price trends for commodity futures. The monthly commodity prices in nominal US dollars over the period from December 2015 to April 2016 (World Bank’s Pink Sheets) and forecasted period (Author’s Calculations) for May 2016 are presented in tables below (futures related commodities are presented only).
The Pink Sheets for May 2016 will be released on June 3, 2016. Forecasts are projected with an Autoregressive Integrated Moving Average (ARIMA) model based on monthly historical data that is relevant for calculations. Commodities are placed in alphabetical order. Forecasted values: increase in green; decrease in red. It is advised to use forecasted values for identifying the short-term price trends over the period firstly. Because of lowered accuracy in forecasting price trends, some ARIMA models have been corrected.
In addition, the forecasted values have been adjusted to the recent price movements. The significant positive changes are expected for Crude Oil WTI (3.44%), Rice (1.58%), Soybean Meal (1.26%). Palm Oil (-6.32%), Zinc (-5.08%), Crude Oil Brent (-3.81%) will likely drop by the end of the month. Despite of high positive correlation between Crude Oil WTI and Brent (0.987) and Thai Rice 5% and A.1 (0.859), the different price trends have been identified while Wheat SRW and HRW (0.973) trends are the same. Notice that correlation ratio between Pink Sheets' commodity prices and futures prices is low (0.241).
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