Commodity Markets Are Concerned About Tight Stocks

Tight global commodity stocks are a concern in the markets, especially in wheat. Joe Glauber, senior research fellow at the International Food Policy Research Institute, says the tight stocks are making the markets jumpy.

“If you remember 2007-’08, in 2010-11, every report USDA put out would get a reaction, right, because the market with tight stocks, any little piece of information is important information. We see this and just look at the implied volatilities in the market right now, look at the reactions to any sort of news. So, I think that we look at the Monday crop conditions report, everyone’s looking at that and seeing what’s going on with the wheat crop, looking at planting progress. There’s millions of press stories about that stuff because it really matters right now. Supplies are tight. We need more of a lot of commodities, not just wheat.”

He says the markets will eventually work through the high commodity prices making it difficult for some countries to import food.

“I do think that the markets will take care of this. The big problem is the uncertainty in Ukraine, itself. I don’t think there’s any early resolution to that right now, that from my perspective, so I think this uncertainty is going to remain with us. It doesn’t help that we have a wheat crop that’s not in great shape right now. It doesn’t help the plantings are behind right now. The markets are going to work through this. Ultimately, my concern from the standpoint of humanitarian aspects is that prices are just really high, and for poor countries and others who are facing these larger input bills, they need assistance.”

Glauber says he understand that people want to do something to combat the high prices and food insecurity. However, he says paying farmers to plant extra crops this year might not be the right idea.

“Farmers have plenty of incentives right now. I mean, prices are really high. And I don’t think that we need to be telling farmers what they should be planting. I think the markets saying very clearly what needs to be planted. My own feeling is that the markets will take care of this. It’s just going to take time.”

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