Commodity inflation is everywhere – PhosAgro’s Andrey Guryev

Soaring commodity prices are at the center of the ongoing inflation talks. Over the past two weeks, a selloff has rocked markets including cryptocurrencies, stocks, and commodities.

PhosAgro on commodity inflation

PhosAgro’s CEO, Andrey Guryev, has indicated that commodity inflation has extended to all the involved subsectors. For instance, heightened demand has led to a hike in fertilizer prices. Nitrogen fertilizers have soared by close to 47% since a year ago. The product, which has been at about $150/tonne is now at around $360/tonne.

In his interview with CNBC, Guryev noted that freight costs, coupled with a surge in oil prices and raw materials, has contributed to the hike in prices. He stated, “Commodity inflation is everywhere. Prices are rising and are expected to continue rising”. According to the CEO, the situation is not likely to normalize in the short term.  

Commodity selloff

The commodity boom, which has been the biggest in decades, seems to have stalled. To begin with, China is keen on cooling off the prolonged rally. On Wednesday, the State Council stated that it will strengthen its measures to manage supply and demand dynamics with the intent of stabilizing commodity market. Inflation fears have also triggered the selloff. Notably, the inflationary pressures are observable in all markets including cryptocurrencies and stocks.  

In the stock market, the Dow Jones Industrial Average is at 34,084.16 points, after hitting a new record-high two weeks ago at 35,129.80 points. During the same period, Bitcoin has dropped from $60,000 to its current 42,000. In the commodity market, copper futures have fallen by about 8% in the past two weeks while soybean price has dropped by about 9% within the same timeframe.

Central banks monitoring inflation

The commodity selloff is impacting raw materials as well as soft commodities. It is a reaction to the inflation jitters that have rocked the markets recently. As economies reopen and recover from the far-reaching effects of the coronavirus pandemic, various countries are monitoring the rise in inflation to avoid overheating. For instance, the Bank of England (BoE) has indicated that it is keenly evaluating the situation and will not allow inflation to persistently rise above its 2% target.

Similarly, FOMC meeting minutes hinted at probable talks on tapering bond buying in coming meetings. In theory, tightening of the monetary policy would help strengthen the US dollar. Since most products are valued in dollars, the decision would be a bearish catalyst for the commodity spot prices and futures market.