Food inflation risks bolster case for commodities

Food inflation worries are adding support to the bullish commodity story, according to Wells Fargo Investment Institute's global real assets analyst, Mason Mendez.

In a recent note, Mendez says disruptions to global grain supplies and stubbornly high production costs are strengthening the case for commodities. Russia and Ukraine accounted for roughly 30% of global wheat exports in 2025, and attacks on grain terminals and shipping infrastructure in the Black Sea since July have raised fresh concerns about getting supplies to world markets.

Higher diesel, fertilizer and other farm-input costs are adding to the pressure. Those rising expenses have helped fuel a broad rally across agricultural markets, with most major ag commodities posting double-digit gains this year and wheat prices reaching their highest levels since 2022.

Mendez doesn't expect those pressures to ease anytime soon. The outlook for the Russia-Ukraine conflict remains uncertain, while refining-related challenges continue to keep production costs elevated.

Against that backdrop, WFII remains constructive on commodities. The firm sees broad commodity exposure as a potential hedge against further increases in food and energy prices and views pullbacks as buying opportunities. WFII expects the asset class to deliver further gains through 2027.

Meanwhile, the FTSE/Core Commodity CRB Total Return Index .TRCCRBTR finished Monday up nearly 46% so far this year.