Natural gas and timber prices drop by 60 from their peak… There are signs of a recession

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International natural gas prices have fallen by nearly 40% in a month. Copper prices, which serve as a ‘barometer’ of the global economy, fell to the lowest level in 17 months. Grain prices, such as wheat and maize, also fell to pre-Russian levels before the invasion of Ukraine. There is an analysis that inflation has peaked and concerns that it is a signal of an economic downturn.

○ With stable raw material prices

The Wall Street Journal (WSJ) reported on the 4th (local time) that inflationary pressures are likely to ease as international commodity and grain prices fall. The price of natural gas in the US, which was $3.63 per MMbtu (million Btu) at the beginning of the year, soared more than 156% to $9.32 at the beginning of last month, then plummeted 38% to $5.73 at the beginning of this month. The price of West Texas Intermediate (WTI), which was in the $70 range at the beginning of this year, also broke the $120 range last month and then fell to the $100 range.

This was largely due to an improvement in supply and demand conditions due to an increase in supply. A fire at a Texas gas terminal, the largest natural gas export window in the United States, halted exports to Europe, boosting natural gas inventories in the United States, the WSJ reported. According to the U.S. Energy Information Administration (EIA), U.S. crude production averaged 12.1 million barrels per day from the 18th to the 24th of last month, the highest since April 2020, when the coronavirus spread.

Copper prices also fell more than 21% in just one month, from $4.55 per pound to $3.57 per pound. The $3.5 range is the lowest level since January 2021. In the past month, cotton prices also fell by 33%. “As the pandemic ends, copper and cotton prices are falling as purchasing demand shifts from commodities to services like travel,” the WSJ said.

Wood prices also plummeted 31% in May alone. The WSJ explained that the bubble in the timber market is bursting as the new housing market cooled as the loan interest rate soared after the base rate rose.

The WSJ, citing financial information provider Factset, said that at the end of last month, prices for timber and natural gas had fallen more than 60% from their highs this year. “The fall in international commodity prices is clear evidence that inflation is calming,” said Louis Nabellier, chief investment officer at commodities investment firm Reno.

○May be a sign of recession

International grain prices, which have been soaring, are also on the decline as export routes to Ukraine, the world’s breadbasket, are blocked. International wheat prices rose to around $1,425 per bushel in March, right after Russia’s invasion of Ukraine, and fell to around $900 a month later. However, as the war prolonged, it rebounded to the $1277 level in May, but fell again to $831 at the end of last month. This is lower than the 24 February (874 USD) when the Ukraine war broke out.

During the same period, the price of corn also fell from $800 per bushel to $610 per bushel. It was lower than before the war, which was around $680. The price of vegetable oil, such as sunflower seed oil, which was once in short supply, also stopped rising. As the recent drought has eased, the outlook for grain yields in the United States, Europe and Australia will improve this year, the WSJ reported.

Experts agreed that the fact that investors who have flocked to the commodity futures market are withdrawing their funds is also driving down commodity prices. Tracy Allen, commodities strategist at JP Morgan Chase, said: “In the fourth week of last month alone, about $15 billion of commodity futures were withdrawn, resulting in a fourth straight week of net outflows.

Some view this downtrend as a sign of an economic downturn. “I’m not sure if the Fed has caused the economy to crash,” said Craig Turner, a broker at StoneX Group, a commodities trader.

Washington = Correspondent Jeong In-seol [email protected]

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