Re: Hope on the inflation front
I think there are multiple factors in the grain prices - Energy, Ukraine, and of course weather.
The cost of energy affects nearly everything. Mining, refining, and transporting Potash and Phosphorus takes a lot of energy. Ammonia manufacturing alone accounts for 2% of total world energy consumption, and Natural Gas is the usual source for the hydrogen required. Oil is still high so diesel is still high, but Natural Gas has come down because of summer. A gambler might think now is a good time to lock in at least some of your 2023 Nitrogen needs. I could lock in urea from my local elevator for $540/ton right now.
The Ukraine War is a double whammy - Ukraine's crops largely cannot get to market, and Russia is a global supplier of oil and phosphorus, not to mention wheat. The market prices in the uncertainty about future supplies that the war creates.
And of course the weather - we came into 2022 with ample starch inventories (wheat and corn) but kind of thin on oilseed inventories (soy, palm oil) due to various weather issues around the world. That also gets priced in by the market.
So what to make of recent price declines despite all these issues still being in play?? Every storm has a lull. I think we may be in a lull for the next couple of months. The US administration is talking about reducing gasoline prices (but are doing nothing to increase supply), the Ukraine War has become a boring stalemate and has been pushed off the front pages by Supreme Court announcements. Brazil's second crop is coming to market now so eyes are off the weather for a little while. But, I have every confidence that no government cannot take a bad problem and make it even worse. OPEC has less than 1 million bpd spare capacity, and the G7 is trying to push Putin into a corner. Everyone knows you don't try to corner a wild animal. Bloomberg reports that JP Morgan speculates that Russia could retaliate by cutting production by 3 million bpd, which they think could send oil to $190/barrel.
So enjoy your 4th of July celebration, and tomorrow start thinking about what could go right or wrong for 2023. Probably not too early to start thinking about locking in at least a portion of your critical 2023 needs, unless you think Putin will give up in Ukraine, Biden will start supporting domestic energy production, and it will rain an inch every Saturday night...
Re: Hope on the inflation front
In this "brave new world" do economic events have a shorter half-life? Like remember the recession of 2020? Don`t feel bad, no one does.
Inflation will disappear on it`s own, not because anything the guy in the White House is a idiot savant, he`s just an idiot. The "punchbowl" was taken away, no covid relief checks or PPP forgivable loans this year. The credit cards will be maxed, last of the extended unemployment will run out, the sweet new ride with a 72 month $700/mo payment will be repo`ed . I look for inflation to go away and the piper wanting to be paid, that won`t be so much fun. More Ramen noodles and less ribeyes on the dinner plates.
It`s funny, about 10 yrs ago we had $150 oil and diesel was $4, now with <$120 oil, diesel is $5.50. This inflation wasn`t commodity driven.