Currency: The next commodity risk management disruptor

This is an excerpt of the original article. It was written for the November 2016 edition of Supply Chain Management Review. The full article is available to current subscribers.

November 2016

Is supply chain management strategic or tactical? Are the best supply chains collaborative? Should the goal be an integrated supply chain or an integrative supply chain? The answers are a mixed bag, according to this month’s contributors.

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In recent years, commodity volatility has quietly slipped out of the minds of business leaders. In fact, over the past five years most commodities—though not all—have fallen substantially. Though most media attention is given to crude oil, which is half of its value from five years ago, other commodities have also fallen at a breakneck pace including corn (-44%), copper (-38%) and wheat (-30%).

Those declining prices have made many businesses look good and led economists to debate whether we are at the end of a commodity super cycle that will propel prices even lower. For example, as China tries for a “soft landing” of decelerated economic growth, commodity prices could fall further as demand slows. If so, those lower prices may give business leaders a false peace. The decline in commodity prices is already adding political pressure to do something on commodity exporters such as Australia and Saudi Arabia, and sparking political unrest in countries around the world such as Russia and Venezuela. It leads one to wonder if currency wars aren’t looming in the future, and if so, what comes next?

In fact, there is evidence that the currency wars have already started. Compounding the issue, the last two years have crushed the markets’ belief in the predictability and stability of currency values. Consider the following:

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