The holidays are here, so get ready for excitement — at the cash register. That family dinner is costing more this year than it ever has before. Need to gas up for errands, or heat the home? Brace yourself for sticker shock.

Inflation did a number on household budgets over the past year, and the coming Yuletide season is promising more of the same, especially when it comes to food and fuel.

Those are the two most volatile parts of inflation, meaning they can go up or down suddenly based on the latest pressures from supply and demand.

The broader economy moves a little more predictably, and inflation overall is likely to cool in the weeks and months ahead, as painful medicine from the U.S. Federal Reserve kicks in. As for wheat, natural gas, eggs, gasoline and other everyday commodities, the outlook is less certain. And at least one closely followed expert sees more risk for commodity prices to shoot higher than to trend lower.

Speaking at the Futures Industry Association conference in Chicago, Natasha Kaneva of JP.Morgan Chase said commodity prices already stand at high levels, based on the backdrop of slowing economies around the world. Still, she said, “The risk is to the upside, not the downside.”

The market that worries her most: Agriculture, she said.


Commodities trade globally, and prices reflect events that may seem impossibly remote. Few of us closely track the drought in Argentina growing areas, the intensity of the La Nina weather pattern in the Pacific Ocean or outbreaks of avian flu wherever poultry is raised. Yet those seemingly obscure factors can influence whether a gallon of milk costs more in Chicago than a gallon of gasoline.

The biggest wild card is an event that Americans have followed closely. Russia’s war on Ukraine has disrupted production in one of the world’s top breadbaskets. Ukraine is shipping less grain than normal and most of the outflow is from the 2021 harvest, before the war began.

This year’s harvest in Ukraine is down sharply. The war has taken out about 20% of that war-torn nation’s usual farm acreage, according to Kaneva, head of her bank’s global commodities research operation. Yields of wheat and corn on those reduced acres will be at least 15% lower than normal, according to her analysis, as the conflict robs Ukrainian farmers of access to fertilizer, seeds, fuel, equipment and manpower.

Making matters worse, this fall’s planting season for winter wheat was a bust, suggesting Ukrainian grains will be in short supply for 2023 as well, pushing up the price for animal feed and other basic products. “That’s a very, very big worry for us,” Kaneva said.

The Ukraine war also affects energy markets. Russia, a big supplier of oil and natural gas, continues to sell to China and India, but shipping to those markets via tankers takes weeks and raises costs. Meantime, Europe has woken up to the risks of relying on Russian President Vladimir Putin. European Union imports of Russian energy products have fallen sharply, and additional sanctions against those products are scheduled to kick in if the war on Ukraine continues.

Europe has stockpiled enough Russian natural gas to make it through this winter, but unless the war ends, it will be hard-pressed to get enough for 2023 and beyond, raising the risk of a lengthy recession. China is growing relatively slowly amid periodic COVID-19 shutdowns and a strong dollar that raises the cost of its manufacturing inputs.


When economies run cold, commodity prices usually come down. This year, as Kaneva warns, it may not happen. That puts pressure on needy Americans who already have felt the greatest hardship from inflation.

The unhappy outlook stands to affect negotiations for the upcoming farm bill, which is federal legislation covering agriculture subsidies and food stamps, typically approved every five years with bipartisan support.

This year, Democrats want a farm bill that reduces emissions from agriculture and expands programs for feeding the poor. As of this summer, more than 41 million people were receiving food stamps, formally known as the Supplemental Nutrition Assistance Program.

Republicans, who just won a narrow majority in the House and are likely to try and rein in spending, may prefer cuts to food programs or stiffer work requirements, and they may try to divide nutrition and farm programs into separate bills, which would likely hold up approval.

The debate could be especially contentious. The GOP needs every House vote to hold its majority. Democrats, meantime, already are up in arms because emergency food-stamp relief from the pandemic will begin expiring in January, putting more pressure on poor families even as prices remain high.

We want Congress to do its job effectively, for a change. There needs to be compromise on both sides to arrive at bipartisan legislation. The stakes are high, and it would be a pleasant surprise to see Washington get its work done without the demonizing and disruption that could easily break out if extremists on both sides hijack the talks. One thing’s for sure: Anyone counting on the commodity markets to bail them out of today’s challenging economic times is counting on too much, too soon.

Editorial by the Chicago Tribune

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