Given the recent positive price action of grains and moves by the Federal Reserve the possibility for commodity inflation has started to become a possible reality.
Inflation in it’s nature is quite simple as it’s a general increase in prices and fall in the purchasing value of money. Arlan Suderman, Stone X, explains that often fund managers try to hedge or protect themselves against inflation by purchasing commodities. In mid August the Federal Reserve for the first time in nearly a quarter century unveiled a plan that look to move the US away from monetary policy that kept inflation at around 2%. Given several years of low inflation the Federal Reserve is now ready to let inflation go past 2% for a while before reeling it back in, to offset the years of low inflation. This again is a check mark for the commodity bull that is wanting inflation to help raise prices.
The second important check mark for a commodity bull is available cash to be invested into commodities. That is currently at an all time high and sets at 5.413 trillion dollars. This readily available cash is known as the M1 Money supply.
However Suderman is still cautious to say we could see strong commodity inflation like that of the early 2000s through 2013. That type of strong inflation tends to be more cyclical and Suderman has personally only seen it twice in his life time.
Hear more from Arlan Suderman, on how M1 money supply and commodity inflation go together:
Wet weather moving through the Midwest
4.00 corn a ways out on the futures but what does that mean for corn
WASDE on Friday
3 typhoons hit China the past two weeks with damage to their corn crop.
Did you know China doesn’t buy corn from Brazil.
China continues to buy US beans
Reversal in the cattle market, restocking beef time
lean hog index above $60 first time since May 28th
Arlan Suderman Chief Economist with Stone X joins the Fontanelle Final Bell midweek following a big day of data. At the top of the data pile was the August WASDE report, which to some surprise corn and soybeans were able to make gains following the report. Suderman recaps the data and why the trade may now be moving on from a supply story to a demand story. Suderman is key to point out though that USDA may be getting a little too generous with their export and feed use projections for corn.
Suderman in the first segment also addresses the derecho wind event that caused damage to as much as ten million acres of crops in Iowa. Suderman’s estimates on the potential yield loss from the storm are wide and have carried a lot of criticism and support on social media.
The final portion of the Fontanelle Final Bell focuses on China and what it means for US exports that China is currently driving a hard line story of self sufficiency.