Opinion Amid volatility, a supply comfort in commodities
The supply comfort in commodities, both global and domestic, is a redeeming feature in the present situation, where the rupee and the stock market are in freefall amid continued selling by foreign portfolio investors and capital outflows from India.
Geopolitical risk and uncertainty are often beyond any government’s control. The same cannot be said, though, about macro stability and policy predictability.
In 2022, Russia’s invasion of Ukraine, even as the world was recovering from the post-pandemic supply chain disruptions, sent international prices of food and other commodities soaring. The benchmark FAO Food Price Index scaled an all-time high of 160.2 points in March and Brent crude futures crossed $139 per barrel on March 7 that year. In contrast, the recent geopolitical storms — whether in Venezuela, Iran or Greenland, not to speak of US President Donald Trump’s seeming upending of the world order — have had minimal effect on the global commodity trade. The FAO index is well below the 2022 peaks, averaging 124.3 points in December, while Brent prices are at around $65 per barrel now.
As far as supplies go, the world is moving to surpluses. Global wheat production is projected to reach a new high, mainly on the back of bigger crops in Argentina and the EU. The same goes for rice, corn and barley, where the drivers for record output are India, the US and the EU respectively. In oilseeds, too, the expected bumper production of soyabean and palm oil is largely courtesy of Brazil and Indonesia. On top of that, take India’s own total stocks of wheat and rice in government godowns on January 1, which were nearly 4.5 times the required minimum level for that date. The good monsoon rainfall in 2025, in combination with moderate temperatures, has also delivered a good harvest in the kharif and, in all likelihood, the current rabi season as well.
The supply comfort in commodities, both global and domestic, is a redeeming feature in the present situation, where the rupee and the stock market are in freefall amid continued selling by foreign portfolio investors and capital outflows from India. Soft commodity prices are cushioning the impact of a weakening rupee that would otherwise have engendered imported inflation. The Union Budget should focus on macroeconomic stability. Far from taking the foot off the pedal of fiscal consolidation, there should be a clear glide path for a reduction in the deficit and debt ratios of both the Centre and state governments. Geopolitical risk and uncertainty are often beyond any government’s control. The same cannot be said, though, about macro stability and policy predictability.
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