But we don’t think the rally in broadly diversified commodities is over.
With only two countries in the OPEC+ alliance holding significant spare capacity , the group is sticking to a cautious approach in unwinding pandemicrelated production cuts.
The US fracking industry, another potential source of oil in the short run, is struggling to increase output, with companies sticking to their capital discipline strategy.
While Russian exports of industrial metals can be relatively easily redirected, markets were already tight at the turn of the year.
The war’s impact on Ukraine’s production and exports is severe, with Ukrainian agricultural consultancy UkrAgroConsult forecasting a halving of the corn and wheat harvest along with a 30%-40% decline in sunflower seeds.
While there are no official sanctions on Russian grain, self-sanctions have been imposed by some commodity traders, providers of trade commodity finance, and grain vessel owners.
Alternatively, investors who do not seek outright long exposure to commodities and have a lower risk appetite can engage via yield pickup strategies, for example volatility-selling with commodities as the underlying asset.
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