The commodity market reacted negatively to the decision of the Fed (Central Bank of the United States) to raise the interest rate to 0.25%. Practically all agricultural products fell in prices this Wednesday (16).
Commodities, after very high volatility since Russia’s invasion of Ukraine, were already losing steam.
This Wednesday’s drop, however, was not due to the current rate change, which means little to the market, but due to expectations of what lies ahead, says Fernando Muraro, director of AgRural.
The Fed forecasts an interest rate of 1.9% for the end of this year and 2.8% for the next. Muraro believes that a rate at the level expected for the end of this year is enough to move the commodity market.
The funds, currently with very high long positions, would go in search of safer investments. The participation of these funds in the soy complex (soybean, bran and oil) and in corn is only lower than that recorded in 2008 and 2012, periods marked by great attraction of the financial market for commodities.
These market changes, with an eventual outflow of financial resources from commodities and consequent price decline, should only occur in the medium term, according to the director of AgRural.
He believes that oil will still rise again, being followed by agricultural commodities. This is because the offer is very unstructured.
As interest rates advance, there will be a sharp downward correction for oil and agricultural commodities. The dollar goes up.
All central banks should take similar measures to the Fed, says Muraro. The inflation rate, driven by commodities, affects the consumer’s pocket in every way, both on the expensive food side and on the energy and transport side.
The Chicago Commodities Exchange ended the day lower on Wednesday. Wheat, the fastest-growing commodity in the war, dropped 7.4% to $10.69 a bushel (27.2 kg).
Even with the drop in recent days, the current price of cereal is still 27% higher than the day before the Russian invasion. The price of corn dropped 3.7%, and that of soybeans, 0.6%.
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