Rising inflation and the war in Ukraine are stark reminders of how commodities affect us all
Until recently, the commodities market was largely seen as the domain of producers and sophisticated traders.
We’ll break all these forces down in the weeks ahead, but today let’s begin with the basics: Commodities are raw materials or agricultural products that can be bought and sold. Commodities of the same grade are fungible .Energy including oil, gas and derivatives, as well as coal;Agricultural products including corn, soybean, as well as lumber;A commodity’s price goes up the more it is needed or the scarcer it becomes.
As part of the response to COVID, in March, 2020, the Fed cut its federal funds rate by 1.5 percentage points to essentially zero and commenced another quantitative-easing program to steady the bond market. Both of these actions were purposefully inflationary. Higher inflation means a weaker currency so commodities that are priced in that currency rise in price.
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