Commodity markets will likely continue to be volatile through 2023 as the inflation/recession battle plays out
on Feb. 1. Disinflation means prices are still rising, but at a slower pace. The Consumer Price Index in the United States was up 9.1 per cent year over year in July and 6.5 per cent in December. The Fed chairman also noted that labour demand substantially exceeds the supply of available workers and last week’s nonfarm payroll numbers reinforced expectations thatRates and the line we are walking between inflation and recession continue to affect commodity prices.
The price of natural gas is down to US$2.43/MMBTU from a high in August of US$9.81. The price is down 32 per cent over the past month and down 42 per cent year over year. Higher prices in 2022 resulted in more production and ultimately an oversupply, which drove prices down to current levels. Any surplus is usually consumed as colder winter weather approaches, but this winter has been unseasonably warm in Europe and North America, resulting in reduced demand.
Recession fears and the lockdown in China pulled copper prices below US$7,000 per tonne in 2022 from a record high above US$10,000 earlier in the year. The price of copper is up 3 per cent from last month, primarily because of the reopening in China and the idling of the Las Bambas mine in Peru. Protests and blockades sparked by the arrest of former president Pedro Castillo have choked off the transport links to the mine, which supplies 2 per cent of the world’s copper.
Lumber prices moved up 40 per cent over the past month to currently sit at US$500 per thousand board feet. A combination of mill downtime and lower-than-normal wholesaler inventory over the holiday period, along with concerns inventories may be too low for spring construction season, led to this jump in price. Industry publication Madison’s Lumberprices to range between US$500 and US$700 going forward with the lower level being the current average cost of production for West Coast sawmills.
Egg prices are also down in the past month after having almost tripled in 2022. The U.S. Department of Agriculture’s combined regional large-grade-A egg market has seen prices decline so far in 2023 to just over US$3 per dozen after peaking above US$5 last year. Beginning in February of 2022, roughly 5 per cent of the egg-laying hens in the United States were culled because of the highly pathogenic avian influenza.
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