In the event a truce was announced today, it would be likely that commodity prices will remain high for a long period of time. We can only assume that once the war is over, Russia, and most of the democratic world, would enter into a ”Cold War”-type relationship. We may also further assume that most of the world would revisit their energy, food and commodity security.

 

From a geographical point of view, Canada could be described as a mirror-image of Russia. Most of the commodities that Russia produces are the same commodities that Canada produces. Given the sanctions imposed on Russia, this may offer Canada an opportunity to “fill the gap”. The commodities that stand out are consumables such as grains, uranium, potash, oil and gas. Not all of these may be ramped up in the short term, however, the opportunity to increase production exists. Hopefully, some of the roadblocks that corporations have encountered in Canada will dissipate with the new reality that the world now faces. The world needs safe and reliable energy, food and materials. Canada is uniquely placed to provide this to our partners. Hopefully we will rise up to the challenge! I would also like to note that we are overweight in Canadian securities in all of our models.

 

The chart below shows some of the different commodities that Russia, Ukraine and Canada all have in common.

 

Source: The Observatory of Economic Complexity, 2022

 

I have also include a piece from our CIBC Economics team entitled “To fiscal policy there is a season”.

 

As always if you have any questions please feel free to give us a call.

 

Have a great weekend.