top of page

It’s about Ukraine, but Not about Ukraine 🪖

Friday marked one year of the conflict in Ukraine. The conflict strained economies, reshaped international trade, and revamped supply chains.


The conflict triggered higher inflation when the world was already grappling with higher inflation. Prices across commodities - energy, industrial and agricultural saw increases, sometimes running in multiples.


Prices have gone back to pre-war levels

One year on, prices for energy, industrial and agricultural commodities seem to have reversed.

  • Oil, which was up 25% within three months of the invasion, has fallen by more than 40% after

  • Nickel prices had doubled within a month, but are now back to where they originally were. Prices are down by more than 10% for copper, iron ore, and zinc amongst others

  • The war sent prices for several items like wheat, corn, soybean and sunflower oil soaring high. However, prices have gone to pre-war levels

For energy and industrial commodities, most of the normalisation can be attributed to reordered trade relations (India buying cheaper Russian oil), substitutes (Europe reducing dependence on Russian natural gas but firing up coal), and slower economic growth (first in China, and then in the West).


For agricultural commodities, prices eased thanks to continued Russian exports, other countries making up for the deficit, and the implementation of the Black Sea Grain Initiative.


But food inflation is a problem

A lot of the cooling off in prices can be seen in inflation rates going off their peak, across the globe. However, one thing that remained sticky was food inflation, and rightly concerning in the case of India. The latest CPI numbers were a ‘shocker’ for many on the street.


Wheat inflation was 25%, rice was at 10%, and Eggs and milk reported inflation at 9%. If international prices have gone back to pre-war levels, and if it’s not about Russia-Ukraine any longer, what is it that’s driving food inflation in India?

  1. Poor domestic wheat crop after last year’s heat wave

  2. Poor rice production because of rainfall deficits and irregularities

  3. Rising fodder prices

  4. A global egg shortage caused by a nasty bird flu

What next?

We reckon there is a case for stability on prices of energy and industrial commodities hereon as the Western economies have shown more resilience and now that China intends to come back with all its might.


On food inflation, there is little that central bank policies can do when the problem isn’t demand-led, but rather supply-driven. Both these factors make a case for prices to remain steady to higher in the coming months.


💡 Our View: Sticky inflation may push the RBI to hike rates once more in April. This pushes the probability of a reversal in monetary policy towards the end of the year. Higher rates and higher yields are expected to stay for at least a couple of months, after which, it would be a good idea to start shifting maturities on debt portfolios. A policy standby if not reversal would offer a window for locking yields.


Comments


Rupeeting

Powered by Paterson Securities Group

  • Rupeeting Youtube
  • Rupeeting X
  • Whatsapp

Email: sawaal@rupeeting.com

Support: +91 97697 70046

22/A Shah Industrial Estate

Off Veera Desai Road

Andheri West

Mumbai 400053

Rupeeting Logo.png

Alphaware Advisory Services Private Limited (Brand Name - Rupeeting) makes no warranties or representations, expressed or implied, on products and services offered through the platform. It accepts no liability for any damages or losses, however, caused in connection with the use of, or on the reliance of its advisory or related services. Past performance is not indicative of future returns. Please consider your investment requirements, risk tolerance, goals, time horizon, risk and reward appetite, and the cost associated with the investment before choosing a fund, or designing a portfolio that suits your needs. Performance and returns of any investment portfolio can neither be predicted nor guaranteed. Investments in mutual funds, stocks, ETFs and any other investment products that you see Rupeeting's views being expressed on are subject to market risks. Please read all scheme related documents carefully. The content and data available in the material prepared by the company and on the website of the company, including but not limited to index value, return numbers and rationale are for information and illustration purposes only. Charts and performance numbers do not include the impact of transaction fee and other related costs. Past performance does not guarantee future returns and performances of the portfolios are subject to market risk. The information is only for consumption by the client and such material should not be redistributed. Data used for calculation of historical returns and other information is provided by exchange approved third party vendors and has neither been audited nor validated by the Company. Detailed return calculation methodology is available here. Detailed volatility calculation methodology is available here. Registration granted by SEBI, membership of BASL and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors. Alphaware Advisory Services Private Limited [SEBI RIA Registration No: INA000015747] [Validity of registration: February 08, 2021-Perpetual] [BASL ID: 1610] [Address: 22/A Shah Industrial Estate, Off Veera Desai Road, Andheri West, Mumbai 400053] [Principal Officer details: Mr. Sagar Lele, Email id: sagar.lele@rupeeting.com, Contact No. +91-9769770046] [Compliance Officer details: Mr. Sagar Lele, Email id: sagar.lele@rupeeting.com, Contact No. +91-9769770046] [Grievance Officer details: Mr. Sagar Lele, Email id: sagar.lele@rupeeting.com, Contact No. +91-9769770046] [Platform Partner: smallcase] [CIN – U74999MH2019PTC320573] [GST No: 27AARCA8847R1ZF] [SEBI regional address: SEBI Bhavan BKC, Plot No. C4-A, 'G' Block, Bandra-Kurla Complex, Bandra (East), Mumbai, Maharashtra, India, Pin Code – 400051.]

© 2025 by Rupeeting

bottom of page