Commodity prices rise and fall to their unique set of drums and are often uncorrelated to the stock market, making them both an interesting and challenging asset class. Early in the pandemic we saw the price of lumber shoot up sharply as people stayed at home and undertook home improvement projects en masse. In early 2022, we saw something similar with wheat prices as Russia invaded the bread basket of Europe. Ukraine accounts for 50% of the world trade in sunflower oil, 15% of corn, 13% of barley and 10% of the world wheat market.
When food commodity prices rise, we see second order effects in the rise of input costs, mainly seed and fertilizer. This story played out in the past with the rise of the BRIC countries (Brazil, Russia, India and China) in the early 2000s and the corresponding rise in commodity prices. Companies like Intrepid Potash (IPI) and Potash Corp Of Saskatchewan that manufactured potash and nitrogen fertilizers saw huge run-ups in their stocks both before and after the 2008-2009 recession, followed by steep subsequent declines during the dead decade for commodities. These stocks have been resurrected from the dead in recent years and remain just as volatile as I remember from the mid-2000s.