The cost of energy and metals will rise in the very near future, but the real threat to the world is a jump in food prices, warns the Indian newspaper The Hindu BusinessLine
The Hindu BusinessLine backs up its disappointing but rather trite observation with an interesting forecast from US-based Fitch Solutions:
“Commodity prices remain under pressure as fighting in Ukraine intensifies. Our main view remains that the conflict will move into the second quarter of 2022, when Russian troops take control of Kiev”.
Commodity indices have jumped 8-21% over the past month. The Thomson Reuters CRB Index, which includes 21 commodities, is up more than 15%. The London Metal Exchange (LME) index has added almost 9% and the S&P GSCI, a composite index of commodity returns, is up more than 20%, the publication notes. And it doesn’t end there.
Western sanctions against Russia will expand and the conflict in Ukraine will deepen, Fitch Solutions believes. Meanwhile, it is extremely difficult to find a replacement for the Russians in the market, and disruptions in exports from Russia have greatly exceeded expectations, so trade has become much “more chaotic and expensive”. This applies to oil and metals, especially nickel, palladium, aluminium, titanium and uranium supplies. But the worst situation is with food.
“If the war lasts into the summer, the next harvest will be crucial: we could be facing a big deficit. We are talking above all about wheat, soybeans and corn, but not only. Problems with oil products from Russia have resulted in higher prices for other products too, especially sugar, palm oil and cotton. And price pressures are unlikely to abate in the foreseeable future,” Fitch Solutions warns. And then there is the fertiliser factor….
It is noteworthy that in our country the harvest will be all right, analysts say. In Russia, the crops will not be damaged by the war. And Russians will not watch their crops go to waste but will sell their surplus, to the benefit of countries that have not imposed sanctions, predict experts from the Swiss EFG International.
Elena Panina