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Central Banks just can’t control the weather 

Central Banks just can’t control the weather 

Australia’s annual inflation rate edged up to 3.6 per cent in April, and this included food price inflation of 3.8 per cent. And according to the U.S. Bureau of Labor Statistics, energy and food represents 7 per cent and 13 per cent, respectively, of the U.S. consumer price index (CPI), whilst commodities represent close to 36 per cent. That said, central banks in setting monetary policy, generally place less emphasis on the price changes of these more volatile inputs. 

Commodity prices have mostly been trending upward since the commencement of the Russia-Ukraine War in February 2022. The increase in the prices of many soft (and hard) commodities over the recent several months is constraining the U.S. Federal Reserve’s (Fed) ability to hit its 2 per cent inflation target, and this will likely delay it in cutting the U.S. Fed funds rate from the current 5.25 to 5.50 per cent. 

In the table below, I have analysed the price change – both on a year-to-date (YTD) and 12-month basis for various commodities, which feed into the cost of living for average Americans. 


Price per unit (1). 

Year to Date (YTD) movement (%) 

12-month movement 






Crude Oil 




Natural Gas 
















Orange Juice 




Feeder Cattle 




Lean Hogs 




Rough Rice 

U.S.$18.05/per hundredweight 



(Calculation at 28/5/24)

Central banks have no control over “bad weather”, which increases supply concerns and is often attributable to the significant jump in the price of selected commodities.  

The U.S. government’s wheat forecast, for example, is thought to reflect the smallest global stockpile in nearly a decade. Meanwhile, U.S. “all fresh beef retail value”, a composite value based on “choice beef, other beef and hamburger retail prices”, recently hit a record high. Data from the U.S. indicates the nation’s beef supply is approaching the lowest level for many decades.  

As Australian graziers aggressively sold their livestock into the threat of drought in late 2023, beef and lamb at the farmgate were priced at very depressed levels. However, consumers did not benefit because the middleman and the retailers stole the additional margin. 

With excellent recent rain on much of Australia’s eastern seaboard, many Aussie graziers will benefit; however, I suspect the consumer is unlikely to see lower prices at the meat counter. 


Chief Executive Officer of Montgomery Investment Management, David Buckland has over 30 years of industry experience. David is a deeply knowledgeable and highly experienced financial services executive. Prior to joining Montgomery in 2012, David was CEO and Executive Director of Hunter Hall for 11 years, as well as a Director at JP Morgan in Sydney and London for eight years.

This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.

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