Analysis - Some Important Prices Are Dropping: So What?

GM and welcome to So What: your favorite morning snippet of risk-focused news and data. I've something different for you today.

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384 words - 1 min, 30 seconds read time

A Different Take Today

A few of the topics we've looked at over the last few weeks have a metric associated with them: shipping container costs or wheat prices, for example. So I thought it's worth checking in on a few of these data points and some other worthwhile indices to get a sense of how things are developing.

I also added Conflict Group's conflict summary to help track where the geopolitical situation may change.

Let me know what you think about this format.

(Note that the prices below fluctuate and are used to reflect broad changes. Market prices may change between publication and you reading this.)

Nutritional Information

Today's post includes large helpings of data.

Conflict (Crisis Group)

In June and July, Crisis Group noted improvements in the situation in Colombia & Yemen in June.

Meanwhile, they assess that the situation is deteriorating in Mali, Ethiopia, Somaliland, Mozambique, India, and Ecuador. They see an opportunity for resolution in Ethiopia.

See the full Crisis Group report.

Crude (WTI)

Crude (WTI) dropped below $100 a barrel this week and is currently at $95.96, a 19% drop since last month (Bloomberg).

This drop seems to reflect several factors: global markets and consumers have adapted to the effects of the Russian invasion of Ukraine; earlier futures prices reflected the increased demands of the summer travel season; there is hope that President Biden's Middle East trip will lead to some additional supply from Saudi Arabia and other oil-producing states; analysts expect demand to decrease in the Fall as the dangers of a US recession increase.

So what?

These are welcome reductions in crude prices but oil remains volatile, so a small shock could quickly push prices back up over $100. Fuel prices will decrease slowly as reductions are much more gradual than increases.

Shipping Containers (FBX)

Shipping container costs continue to drop from last year's highs. The FBX container index is currently $6,420, a 9.5% decrease from one month ago.

So what?

Prices are still extremely high compared to pre-pandemic levels, but supply chains continue to adapt, which should help address demand issues and reduce prices.

Wheat (Chicago Board of Trade)

Wheat prices for September 2022 are currently at $801 (CNBC), down from $1,078 last month, a 25% drop.

So what?

This decrease should ease prices by Q4, but bread, couscous, and pasta will remain expensive throughout the summer, meaning that the associated tensions and food shortages will continue for several months.

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