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  • Commodity market disruptions, growth and inflation

    From bis.org Story is in PDF Format

    The war in Ukraine triggered a surge in commodity prices. In the weeks after its onset, oil prices rose by over 30% and European natural gas prices by more than 60%. Food and metals prices also spiked (Graph 1, left-hand panel). These increases came on top of substantial price gains in 2021, moving prices well above pre-pandemic levels. Although prices have since retreated somewhat, they remain high by historical standards. As the war continues, the outlook for commodity markets is remarkably uncertain. Rising commodity prices went hand in hand with the threat of major supply disruptions. Russia and Ukraine are ... (full story)

Lot of misunderstanding created for casual reader about this "World Food Crisis", and spike in commodity prices.
Take wheat. World production of wheat is circa 750 mio tonnes.
1. Only 70% of that is actually used directly for food.
2, About 25% of global production (185mio tonnes) is traded internationally (exported)
3. 75% of this traded volume is not disrupted.
4. meaning that the Russian/Ukraine conflict has effectively disrupted 25% of traded volume. Enough to create a major price spike in pending short time contact prices, as shippers scramble to fulfill the unexpected shortall.
The disruption is NOT a Supply crisis, no indication that world Wheat production is down any signiicant extent.. it is a Transport/Supply Chain Crisis, with key supply channels being temporarily cut through Physical (military) and Economic (sanction) Blockade.
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  • Posted: May 18, 2022 7:40pm
  • Submitted by:
     Newsstand
    Category: Fundamental Analysis
    Comments: 1  /  Views: 1,111
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