Resources and Diplomacy

Pre-election manoevering masks vulnerable commodity markets

Western sanctions on Russia's exports of oil were eased in part to offset the near total cut-off of oil leaving the Persian Gulf, while the US Administration further stressed relations with its allies over diesel exports before strategic reserve releases eased transatlantic tensions. Russia stood to benefit enormously, as sanctions had been having a major impact on its economy after four years of war. Meanwhile, as the US may be close to exhausing supplies of available defensive missiles, Ukraine succumbs to intensified anti-civilian bombardment.

In the wake of its early hostilities with in Ukraine, in combination with the collateral disruption to supplies of energy and curtailment of grain exports from both countries, the Russian invasion initially caused intense commodity market turbulence for several months in late 2022-early 2023. However, over time, as to a large extent prices settled down as new buyers were found for embargoed commodities and new sources of supply emerged for sanctioned exports. The Critical Minerals Security Pact struck between US President Trump and Ukraine's President Zelenskiy in 2025, if implemented, signals a new paradigm for global commodities trading. The soft border that still exists, no matter how frayed, between geopolitics and finance may still give way to a solution where commerce becomes paramount even at the cost of hard fought military and political objectives.

Beyond Ukraine, from the closing months of last year to the present day, almost anywhere on the global map may become subject to threats of invasion whether from superpowers-regional powers with their local strategic ambitions. US-China trade relations are enjoying a reprieve from recent tensions after the Xi-Trump Washington Summit, while US access to critical minerals whose supply is dominated by Beijing remains a core concern. The EV industry and battery technology depend on several key elements including lithium, cobalt, graphite and phosphorous as well as copper, nickel and manganese.

Grain Markets in Suspense after summer rally

China has completed its purchase of 12 million metric tons of U.S. soybeans for the current season. It “agreed” to purchase 25 million metric tons for the 2026/27 season and is slowly starting to accumulate those purchases. Additionally, U.S. crush continues to run at a record rate and, with new facilities coming online, demand for soybeans is expected to remain robust. Corn and soybean prices have done a lot to the upside and U.S. harvest is just around the corner. A price pause around current levels until the harvest is nearer completion looks probable.

Wheat prices continue to be driven by headlines surrounding Ukraine and the Black Sea situation in particular. If Russia and Ukraine reach a peace deal or reopen a grain corridor, we would expect that prices could see a sharp pullback. Conversely, as end users can not delay purchases indefinitely they could then be forced to secure supplies from alternative origins. Russia exported roughly 2 million tons in July, essentially unchanged from a year earlier, but shipments fell to just 2 million tons in August as well, down from 4.4 million tons the prior year. For September, exports are expected to total a meager 1.8 million tons, compared to 4.8 million a year ago. These declines are especially significant because August through November represent the peak months for Russian wheat exports. The market could not absorb a sustained fall in Russian shipments and unless Russian exports recover soon, the impact will be felt through higher wheat prices globally.

As the northern summer's ravages subside, El Niño stalks in the wings

As much of the northern hemisphere is still in recovery mode after a record-breaking summer of '26, the world is nevertheless entering uncharted territory as the record-breaking El Niño continues to gather strength in the tropical Pacific. This vast release of heat and moisture from the ocean is expected to severely warp weather patterns in 2027 around the world, leading to further intense heat and drought in some areas, and torrential rain, hurricanes and storm surges in others.

The tropical Pacific has an outsized ability to affect the global climate. El Niño has two main impacts. The first is to push up global air temperatures around the world, as heat released from the Pacific Ocean makes its way into the atmosphere. According to The New Scientist's projections, that means 2027 is nearly certain to be the hottest year on record, and countries around the world are bracing for prolonged, dangerously high temperatures.

"We will see, with almost virtual certainty at this point, record-breaking global temperatures later this year, 2026, and almost certainly in 2027," says Daniel Swain a Climate Scientist at the University of California. A remarkable statement, given that we've seen record-breaking temperatures so often in recent years. The second impact is changes to the global hydrological cycle. El Niño changes atmospheric circulation patterns, shifting the location and timing of rainfall. That produces heavy rain and flash flooding in some areas, and severe drought in others.

These twin impacts will occur against the backdrop of a warming world. A warmer atmosphere holds more moisture, which makes the rainfall and drought effects of El Niño even more pronounced, while global temperatures are pushed even higher than they would otherwise be."El Niño kind of acts as a mini, sudden climate change on top of the not-so-mini, not-so-sudden, climate change we've already seen," says Swain.