Weekly commodity wrap-up

Ukraine’s Grain Imperiled

Russia’s invasion of Ukraine caused panic buying of wheat and corn toward the week’s end. Ukraine is one of the world’s largest exporters of wheat; combined with Russia, they typically supply roughly a third of the world’s needs. The war has some analysts predicting that Ukraine won’t even have a harvest next season.

Over a billion bushels of wheat were wanted by end-users, importers, exporters, and speculators as wheat prices reached record highs and locked the permissible limit up price at Wednesday’s and Thursday’s close. March Chicago wheat hit a high of $13.40 on Friday. As of noon Friday, May Chicago wheat traded at $12.09, May corn at $7.40, and May beans at $16.60 per bushel.

Putin Creates Chaos in Energy Markets

An attack on a Ukrainian Nuclear Power Plant—Europe’s largest—stimulated record buying of crude oil and natural gas since supplies of both are shut-off. Pipelines have been damaged or shut down, ports and other transportation centers are closed, and sanctions against Russian oil (some even voluntary “self sanctioning” imposed by U.S. oil-producing corporations) caused pandemonium in the supply chain. Some of the largest oil-producing companies are also canceling plans and pulling their production facilities out of the region. Russia has been the second-largest exporter of crude to the world. Their removal as an exporter will create turmoil for virtually every aspect of the world’s economy. Crude oil for April delivery hit $113.85 per barrel at Friday’s high, while April natural gas brought $5.00 per million BTUs.

Food and Fuel Inflation on Fire

Historically, worldwide inflation episodes, including those during the past century, have been related to costs of foods and energy due to demand and supply threats related to wars or geopolitical turmoil. Commodities have suddenly been recognized as the most basic foundation of the economy and will, likely, become the focus of all investments, legislation, and international negotiations by world leaders. Climate change and the COVID-19 pandemic have been relegated to the back burner but could quickly emerge to exasperate prices of our most basic needs further.

Federal Reserve Chairman Jerome Powel warned the U.S. Senate Banking Committee that earlier inflation estimates would have to be increased again due to the Russian invasion.