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Market wild cards keep prices volatile

In a normal year, CHS research analyst Joe Lardy says he can count the number of unknown factors driving commodity prices on one hand. This is not a normal year.

"In a year like right now, I'd have to take off my shoes and start using my toes to count out the variables that we have going on," Lardy says.

In a recent CHS roundtable, Lardy discussed the record high commodity prices and volatility the market has seen in 2022. He says with the number of wild cards still at play in the market, commodity prices will remain volatile.

First and foremost, he says, is the situation in Ukraine. Ukraine and Russia combined account for nearly 30% of world wheat exports. The conflict in Ukraine has created uncertainty around every step of the production and export process, and Lardy says the market hangs on every change.

“How do you price a war?" he says. "This is just an unheard of situation we’ve never had to deal with in the grain market.”

Lardy says COVID continues to be a factor, more so outside the U.S. He notes parts of China have remained in lockdowns and that has a significant impact on demand.

Also on his radar is the unknown future of the U.S. economy, which is facing high inflation and possibly a recession.

“Until we know more of those answers, I don’t think we’re going to see volatilities back off.”

As long as volatility remains high, he adds, prices will likely do the same.

“Maybe not record high prices, but certainly not dropping back down to…a bad or ugly scenario,” Lardy says.

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