US-Iran War Sparks Agflation Fears Amid Global Raw Material Price Surge
The raw material market is experiencing an unusual surge in prices, following the outbreak of the US-Iran war. Initially, energy prices skyrocketed, and now agricultural prices are rising. The price of soft commodities like coffee, raw sugar, and cocoa jumped due to the conflict and El Nino, a weather phenomenon that affects crop conditions.
The prices of wheat, soybeans, and corn, the three major grains, have risen significantly over the past six months. According to InvestingCom, wheat futures traded on the Chicago Mercantile Exchange rose by more than 25% during this period, while soybean and corn prices increased by over 10% and 29%, respectively.
The supply of nitrogen-based fertilizers, a key component in soybean and corn cultivation, has been disrupted due to insufficient natural gas. This has raised concerns about the decline in these crops' production. The market is also sensitive due to reduced grain exports from Ukraine and Russia, which are major granaries.
Experts warn that if agricultural prices continue to rise, it could lead to 'agflation', a situation where general prices increase alongside rising food costs. This would have far-reaching consequences, including higher table prices and potential bankruptcies among European livestock farmers.