Commodity price chaos is threatening the global economy

• Global supplies of key food and energy commodities are starting to affect the global economy

• Rising core inflation and hawkish central bank policies are likely to further weigh on global growth

• The global index of all commodity prices has more than doubled so far since the pandemic lows in the second quarter of 2020

Businesses and consumers are already feeling the impact of rising prices for everything from crude oil to grains and metals

Commodity inventories are generally at extremely low levels

Globally, supply of various commodities has fallen short of demand

Tracey Allen, a commodities strategist at JPMorgan, told WSJ reporter Ryan Dezebel: “Inventories are generally very low in energy, agricultural commodities and metals

Commodity supplies could fall further if geopolitical conflicts disrupt substantial exports of energy products from major energy suppliers

The United Nations Food and Agriculture Organization pointed out that the war has caused global food prices to reach record highs

　　"The prospect of continued supply disruptions this year, coupled with weather concerns in the U.

　　Hansen noted that the first quarter of this year was the best quarter ever for the global commodities industry

　　"In the first quarter, the war and sanctions compounded an already strong industry performance, leading to a 24% rise in the Bloomberg Commodity Spot Index, the best quarter in living memory, and thus almost surpassing last year's 26.

　　Speculators exit oil and gas market

　　"Geopolitical conflict and increasingly tough sanctions have cut off multiple supply channels, from crude oil and natural gas to key industrial metals, as well as food commodities such as wheat, corn and edible oils," Hansen said

　　Volatility in commodity markets, extreme volatility, and sharply increased initial profit margins on futures exchanges led to an exodus of oil futures speculators

　　High-margin requirements have boosted liquidity needs for commodity-trading firms that trade spot oil around the world

　　Trafigura chief financial officer Christopher Salmon told the Financial Times Commodities Global Summit in March, “We need a fully functioning commodity futures market, and what we’ve observed is an unbalanced market.

　　Since hitting a pandemic low in the second quarter of 2020, the global commodity price index has more than doubled since the last business cycle, Jim Glassman, managing director and chief economist at JPMorgan Commercial Bank, said this week.

　　According to the economist, even with a peace deal, the market may price in political risk in commodities such as oil, wheat, corn, nickel and palladium
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　　"The futures market expects oil prices to remain high for years to come," Glassman said.
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Consumers are already feeling the pinch from high energy prices, as the spike in oil prices almost immediately leads to higher fuel prices at the gas station
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　　"For every $42 increase in the price of a barrel of crude oil, the average household will spend an extra $500 a year on gasoline," Glassman said
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　　Businesses that rely on raw materials and transportation may find challenges in the coming months
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The economist noted that if a rise in commodity and oil prices starts to spill over into core inflation, that could force the Fed to plan to raise interest rates further, cooling the economy
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