Commodity Exchanges in Chaos Due to War, Consequences Are Yet to Come

International prices of food and animal feed could rise between 8 and 20 percent as a result of the conflict in Ukraine, which would trigger a surge in global malnutrition, reported the UN food agency. Russia is the world’s largest exporter of wheat, while Ukraine ranks fifth. Together, these two countries account for 19 percent of the global barley supply, 14 percent of wheat, and 4 percent of corn, making up more than one-third of global grain exports.

Wheat prices have recently reached a 14-year high, increasing by more than 40 percent, representing the largest jump in six decades, and corn and soybean prices have also approached their peaks from 2012.

Taking this into account, along with the fact that the ban on oil imports by the United States and the United Kingdom has led to rising oil prices, the wild fluctuations in the prices of a whole range of commodities are not surprising.

Many of them have recently reached their historical highs or come close to them.

At the beginning of the month, the price of aluminum reached its historical record, and the London Metal Exchange suspended trading in nickel after the price of that metal hit a record of 100,000 US dollars per ton. For comparison, the price of nickel at the end of last year was around 20,000 dollars per ton.

Zinc has also reached a 15-year high, and the price of copper, which is used in everything from electric vehicles to washing machines, surpassed its previous record at 5 dollars.

Dramatic Price Increases

Australian metallurgical coal reached 560 dollars per ton, which is also an all-time record, as well as thermal coal from Newcastle at over 400 dollars per ton. Reference prices for iron ore rose 20 percent during the past week.

Reference oil prices this week reached a 14-year high, jumping above 130 dollars per barrel on March 7, and some market participants warn that oil prices could rise to 175 dollars per barrel if the Russia-Ukraine conflict continues to impact the global economy.

The Russian invasion of Ukraine is causing the largest shock to the commodity market since 1973. and one of the worst disruptions in wheat supply since World War I. Although commodity exchanges are already in chaos, ordinary people have yet to feel the full consequences of rising bills.

Disposable household incomes in the United Kingdom are on track for the largest decline since the mid-1970s. The Resolution Foundation stated that the dramatic increase in global oil and gas prices this spring is expected to push inflation in the United Kingdom above 8 percent, causing average incomes across Britain to fall by 4 percent in the upcoming financial year, or as much as 1,000 pounds per household.