Inflation is Beginning to Loosen its Grip

The Fed rate hike cycle will soon end, but commodity market supplies remain vulnerable.

The war in Ukraine and inflation will remain the two biggest factors for commodity markets in the first half of 2023. There are now consistent signals that inflation is softening, which should enable the Federal Reserve to comfortably relent on interest rate hikes before mid-year. However, the opening of the Chinese economy could complicate the inflation picture as increased demand for oil and gas in China threatens to upset the delicate global energy supply and demand balance.

In Ukraine, all signs still point to a long, entrenched war that will continue for months to come. The uncertainty of grain supply from Ukraine will persist as U.S. growers prepare to plant another large crop, aiming to rebuild domestic supplies of corn and soybeans. Fertilizer supplies remain relatively tight but prices have declined, which should generate good demand for ag retailers in early spring. Read more