Question: Is the Trading Economics world food price link valid?
Answer: I have seen that same index in the past and honestly do not know how accurate it is. My guess is that even the bumbling dolts at the UN can get a couple of things correct however.
Question: What influences worldwide commodity prices?
Answer: Most of the commodity prices worldwide tend to rise and fall together since the global economy tends to see food grown in one region of the world, rise as demand shifts from a rise in price for the same commodity in another part of the world. That tends to push demand into the lower priced commodity since so much of the global economy is intertwined, causing it to rise in price as well. Same goes in reverse when prices are falling.
Question: Do have any specific examples?
Answer: Wheat is grown in so many countries around the world that its global price rises and falls together in all the countries that grow it. For example, if US wheat prices move higher, demand will shift to Australian wheat or Canadian wheat. Wheat grown in the Ukraine region will then tend to rise as demand shifts towards there. The war over there has messed with this normal response at times but generally what I described above happens pretty consistently.
Same goes with soybeans…if Brazilian beans get too high priced, demand will come back to the US and that pushes our bean prices higher.
Question: What are the best commodity indexes to follow?
Answer: The best commodity index was the old CCI that the Nymex kept up. They discontinued to it however.
Now most folks reference the Goldman Sachs Commodity Index (GSCI) or the Dow Jones/UBS commodity index. I think the latter is also the Bloomberg index but not for sure.
More Dan Norcini insights here
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