Commodity markets are experiencing a winter thaw, stock markets remain in the deep freeze

As 2023 looks for a foothold, both commodity and stock markets continue along paths blazed by last year’s higher-than-expected inflation, Russia’s brutal war, the likely rise of a global pandemic, and a growing power vacuum in American politics. Equity markets hated the bad news of 2022 and most market indexes hit annual highs in early January. After that, it was mostly downhill. The Dow Jones Industrial Average, for example, fell 9% last year. The broader market measure, the S&P 500, lost 19.4% of its value, and the tech-heavy Nasdaq lost 33.1%.

Overall, the Spectator Index tweeted on New Year’s Day that global equity markets lost a total of $18 trillion in value in 2022, or the equivalent of about three-quarters of annual US GDP. Not chicken feed.

In contrast, commodity markets often shrug off the doom and gloom and use both as rocket fuel to shoot for the moon – placing big bets – on prices. This is exactly what happened in December, when severe weather forecasts here and abroad and a decline in the number of livestock and poultry in the US boosted futures prices.

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For example, the USDA’s year-end inventory reports strongly suggest that reduced numbers of US hogs and cattle will keep red meat markets on their current path of high prices. That’s especially true for live cattle, whose April futures ended December just shy of the annual high of $1.62 a pound.

Grain futures also rose at the end of the year. Soybean futures for November 2023, reflecting mounting production problems in Argentina, rose during the holiday season and ended 2022 near their contract high of $14.50 a bushel. That quick boost in soybeans inspired both new wheat crops and new corn contracts to shake off their early winter stupor and just as quickly, following the lead, thrive as well.

Neither small rally, however, looks as sustainable as soybeans’ strong move. Lingering questions about the South American stake will keep global markets on edge until firm answers — best provided by working harvesters — begin to trickle in sometime in mid-February. Until then, an even bigger wild card, China’s rapidly spreading COVID-19 pandemic, could easily undermine almost every other market driver, bullish or bearish, in both equities and agricultural commodities. The reason is the death math centered on COVID that is now increasingly attacking the Chinese people and economy.

It is an almost inevitable consequence of China’s multi-year, deeply contested national policy of COVID isolation. Designed to prevent the spread of disease, it resulted in widespread political discontent and, ultimately, open defiance. When China’s defeated leaders lifted restrictive rules last month, COVID — as expected — quickly filled hospitals and morgues.

With China claiming to track neither COVID hospitalizations nor Covid deaths, at least officially, it is difficult to judge the immediate impact of the pandemic on the world’s largest national population and second largest national economy. Comparing what the US has experienced since 2020 with what China could see in 2023 suggests that America’s largest buyer of agitating raw materials is in for some very tough times ahead.

For example, by December 2022, the total number of US deaths related to COVID was 1.1 million out of a population base of 332 million. If China — with 4.3 times as many people (or 1.43 billion total population) — lost the US equivalent to COVID, it can expect 4.7 million deaths from COVID.

This hindsight assessment is nothing more than that, it is not a prediction or a forecast. It is, however, one market-changing possibility that hangs over nearly every commodity and securities market from Chicago to Shanghai.

Initially, as Bloomberg News suggested in late December, China’s reopening “should boost demand for crops.” And yes, we attended the trade fair at the end of December. January could see a similar blow as China lifts restrictions on “imported chilled and frozen foods” from Monday. Chilled — or perhaps frozen — might be the best word to describe the political possibilities in Washington in 2023, given the bitter Republican caucus and its slim majority.

On second thought, let’s go with frozen. Or, better yet, “Let it go.”

The Farm and Food File is published weekly across the US and Canada. Source material and contact information are posted at

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