alt Hacker NewsOne of those is an absolute value (urea $) and one is a rate of change (food price inflation). Maybe I’m being dumb, but why are they tracking almost 1:1, both with linear Y axis?
I can compare Urea $ to Crude Oil $ and get an even closer 5 year correlation. Are we actually indexing against something else here?
Edit: that is, perhaps urea prices are driven mostly by energy costs, which in turn drives inflation rates.
Yes. Nat gas -> ammonia -> urea. Theres some efficiencies that vary by site but its a hundred year old process of a true commodity. The price per therm _is_ the input.
Was listening to a fertilizer analyst the other day. She thought corn:urea was the better comparison. Nitrogen is the cost of marginal yields. And corn:urea shows the farmer being squeezed between their commodity output price and the required input cost. At some point its just not cost effective to grow corn, so you go soy, and reduced supply should pish up future prices. Oh look! More commodity price inflation pressure!