Falls in crude oil prices and lower bulk shipping costs and volumes are pointers to a period of slowing growth.
OUT of all the commodities and products produced, there is only one (other than water) which is truly essential – food.
We might be mistaken for believing agricultural produce, because of its important status, would be an island, separate from the wider markets and the volatility within them.
But that would be wrong.
Agricultural or food markets are as impacted by the wider macroeconomic environment as crude oil, iron ore or copper.
I looked at two indicators because there are concerning signs. The first is crude oil.
Crude oil is an economic indicator; when global economic growth is strong, then crude oil demand rises and, following basic supply and demand economics, the price rises.
If we look at crude oil and wheat, they follow very similar trends.
There are many theories behind this. Firstly, as demand for oil increases, so does the demand for biofuels.
Corn and wheat are major feedstocks for biofuels, and this increased demand flows through to the price of wheat.
The other important factor is that, with lower economic growth, people start to spend less.
It usually starts with fast-moving consumer goods but eventually flows through to food purchases.
It is morally concerning when people must significantly readjust their food spending, especially in developing countries where larger incomes are spent on food.
The next factor I keep a close eye on is the Baltic Dry Index.
The BDI is an indicator, which is released daily by the Baltic Exchange in London.
It tracks 20 routes over three different dry bulk vessel classes (capesize, panamax and supramax).
The index provides a guide to the cost of shipping bulk goods such as grain, minerals or fertiliser worldwide. Through using the BDI, we can gain an insight into whether freight is becoming cheaper or more expensive.
This is extremely important for a country like Australia and especially Western Australia.
We have a huge volume of commodities exported in bulk, from grains to iron ore.
When freight rates drop, it is a sign of a reduction in the demand for the materials exported in bulk, leading to its secondary purpose.
The BDI also holds a further and equally important role. It is considered by many economists to be a leading economic indicator.
As mentioned, the index represents bulk cargoes, which typically require further processing.
A good example is iron ore, which is shipped to other nations to produce steel and, in turn, buildings and cars.
A higher BDI signifies increased demand for bulk vessels and as a proxy for the materials they transport.
A higher BDI points to an indication of future economic growth and vice versa.
This can be seen in the early 2000s during the commodities boom. During this period of accelerated economic growth, there was a massive demand for bulk carriers, which drove the index to a record 11,793 points.
The crude oil market has come under pressure since the recent heights of the pandemic, and this is despite reductions in supply through OPEC oil production cuts.
The BDI has also come under significant pressure.
These are two indicators (of many) which are pointing towards a period of slowing growth.
We weathered the storm of the global financial crisis of 2007-08 because of our alignment with China.
The concern is whether China will be as strong in the next downturn, and the wider economy, including agriculture, could suffer.
• Andrew Whitelaw is co-founder and director of Episode 3 (EP3)