The concurrent glut of oil as Iran re-enters the market with the agricultural and livestock term structures that are now showing shortages can work against the budget both ways. This is particularly bad timing as contango (shown as negative) is now flipping towards backwardation (shown as positive) in these commodities – with the exception of soybeans:
Even worse for Iran is that importing food may be more expensive than ever due to the highly predicted El Niño. Agricultural prices have been increasing at an accelerated pace with each El Niño since 1982 by roughly 2.6% with large possible spikes following the heat waves.
This article was written by Jodie Gunzberg, global head of commodities, S&P Down Jones Indices.
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