Morning Comments November 11, 2021

Veterans Day Facebook vf

Corn and wheat both traded back up close to recent highs yesterday as a major resurgence of inflation chatter, combined with potential new Russian wheat export rules brought buyers back into the market in droves. 

The Consumer Price Index data for October was released yesterday. While economists ahead of the report were expecting a month over month increase of 0.6%, actual data indicated the prices consumers are paying for goods were up 0.9%.

Putting October data against last year shows a year-over-year increase of 6.2%, the largest year-over-year jump in pricing data seen since 1990. In addition to U.S. data, similar data out of China showed the Producer Price Index there up 13.5% year over year, also much greater than some economists were expecting.

This massive increase in consumer prices is starting to put real pressure on the Biden administration. While there is a whole slew of reasons behind the move higher--supply chain issues being one--the American populace is truly starting to feel the pinch as inflation is eating into paychecks. One data set indicates the American consumer has experienced negative wage growth 7 out of 10 months this year as costs of goods continue to rise.

Some economists and monetary policy watchers are starting to move their expectations of a rate increase up. While many thought it would be November 2022 at the earliest, we have started to see the market price in a June increase, though some feel the move may have to be made even sooner. 

The administration claims they are working to combat the inflationary pressure, though it is hard to reconcile those claims as we continue to see massive amounts of government spending and the continued push to pass the Build Back Better Act.

In addition to inflationary concerns, traders are watching what is happening in Russia very closely. Food costs continue to spike in the country, some of which becoming self-inflicted as officials there work to keep domestic wheat prices weak. 

The Russian Ag Minister is working with exporters and other officials to revise the current export tax in place. In addition to reworking the tax there is talk of another export quota for the first 6 months of the calendar year. Russian wheat growers are understandably frustrated as the country seems to be doing its best to remove itself from the global wheat market as a whole.

Looking ahead, from a technical standpoint, charts look like folks should be in and buying corn and wheat, even if fundamentals don't necessarily point to the same. This alone will likely keep things supported, though the chart action of the day prior has been an extremely poor indicator of the next day's move as of late. 

The government is closed today due to Veterans Day (thank you to all who have served!) so export sales will be delayed until tomorrow. 

Corn 1-2 lower

Beans 1-2 higher