Weekly commodity wrap-up

Jason, Freddy Krueger and inflation

What do they have in common? They’re hard to kill once they get loose.

The Consumer Price Index increased 0.6% in August, seasonally adjusted, and rose 3.7% during the past 12 months. That makes two months in a row that the index has increased. (Annual CPI rose from 3% in June to 3.2% in July).

3.7% inflation is a far cry from the runaway inflation of 8% the U.S. experienced in 2022, but it is disturbing to see it increase when most analysts are looking for one to two more interest rate hikes at most from the Fed before pausing and eventually cutting rates at some point in 2024.

The share of the blame for the recent increase in inflation could be laid at the feet of a steady increase in energy prices during the past two months. October Crude Oil futures have increased 29% since the end of June going from $70 per barrel to just more than $90 per barrel this last week.

A recent announcement from Saudi Arabia to extend its 1 million barrel per day voluntary crude oil production cut until the end of the year has helped to propel oil prices even higher in the past two weeks.

If you believe the past two months of inflation growth is due to higher energy prices, it would mean another increase in annual inflation might be on the way which would put the Fe in a tough position.

Corn prices stuck as early harvest gets underway

December corn futures have traded between $5.05 and $4.74 for the last month. A tight range, that has been getting tighter in the past two weeks, considering the last year of volatile price swings.

A dry hot finish to the year is making it possible for farmers to get an early start on fall harvest that could continue to keep the market under pressure in the coming month as commercial elevators get a chance to fill storage facilities that limped into the end of the marketing year (Sept. 1) with less corn to carry over then usual. Leverage is changing hands from the seller to the buyer and negotiations are currently at a stand still when looking at the board of trade.

Have a comment or question? Please reach out to derrick.hermesch@pinion.global.com.

Opinions are solely the writer’s. Derrick Hermesch is a commodity futures broker with Pinion. He can be reached at 785-338-9605. This is not a solicitation of any order to buy or sell nor does it provide any recommendations in regard to the market. Information contained herein is believed to be reliable but cannot be guaranteed as to its accuracy or completeness. Past performance is no guarantee of future results or profitability. Futures and options trading involve substantial risk of loss and is not suitable for all investors.