MarketsFarm — Shifting weather forecasts may have led to choppy activity in U.S. grain and oilseed markets during the week ended Wednesday, but rising inflation may create even more turbulence going forward, according to an analyst.
The U.S. Bureau of Labor Statistics reported on Wednesday that the annual rate of inflation rose to 9.1 per cent, a level unseen since 1981. The figure confounded analysts who had earlier predicted a slight decline. Scott Capinegro of Barrington Commodities in Barrington, Ill. said he is worried about a strengthening dollar.
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“Demand is going to back off with the strength of the dollar,” he said. “The higher the dollar goes, commodities are supposed to do the opposite and go down. You’ve got world governments that are going to try the best they can to fight inflation or at least slow it down in its tracks.
“The (consumer price index) might be the highest we see this year. Gasoline prices have dropped after the CPI numbers were compiled. We’ve probably seen inflation (with) a couple of downticks in it right now. We’re a far cry from a safe zone, but you’ve got to start somewhere.”
On Tuesday, the U.S. Department of Agriculture (USDA) released its monthly supply/demand estimates, but Capinegro does not believe they had an impact on the markets.
“(USDA) left the yields unchanged in both corn and soybeans,” he said. “It’s more macroeconomics than anything else right now… Crude oil goes down, the grains go down.”
Capinegro also attributes Tuesday’s selloffs, which wiped out gains accrued over the previous few days for corn, wheat and soybeans, to speculation over weather forecasts.
“Some of the weather models are trying to put in a little bit more rain, even with some of this heat that’s coming. It’s summer; some will catch rains, some are not going to catch rains,” he explained.
Commodity prices over the next few days will be dictated by the skies, Capinegro added.
“That’s going to really depend on the weather. That seems to be the driving factor for us,” he said. “Did we see the July lows last week? It’s a possibility. Do I see corn and beans retesting the yearly highs? We’re going to need an awful lot of weather to destroy some yield to see that.”
— Adam Peleshaty reports for MarketsFarm from Stonewall, Man.
