CBOT weekly outlook: Inflation another major concern for traders

CBOT December 2021 corn (blue line) with Bollinger bands (20,2) and MGEX, CBOT and K.C. September 2021 wheats (green, orange and yellow lines). (Barchart)

MarketsFarm — While weather has become a primary factor in rising commodity prices over the past week, traders at the Chicago Board of Trade are also paying close attention on inflation.

Earlier Wednesday morning, the U.S. Bureau of Labor Statistics announced that the producer price index (PPI) increased by one per cent, more than expected, last June, and by 7.3 per cent for the year-long period ending in June. The yearly increase is the largest since 12-month data was first calculated in 2010.

Many observers believe this is yet another sign of upcoming persistent inflation. On July 13, the U.S. Labor Department announced that the consumer price index (CPI) increased by 0.9 per cent in June, its largest monthly increase since 2008.

“There may be some funds behind these commodity markets, especially in the ag sector, in anticipation that we’ll see inflation on the horizon,” said Terry Reilly, a Chicago-area grains analyst for Futures International.

Commodity prices are still receiving support from upcoming hot and dry weather, especially in western parts of the U.S. and Canada. Heat waves in those areas have already affected crop estimates, especially for wheat.

The U.S. Department of Agriculture adjusted its 2021-22 wheat ending stocks from 770 million bushels last month to 665 million in Monday’s world agricultural supply and demand estimates (WASDE).

“All the report confirmed was that the USDA is looking for another year of tight soybean and corn stocks and much tighter wheat stocks. Supply concerns for the wheat are definitely lifting that market higher,” Reilly said.

“If the weather forecasts hold, I think we’ll trend higher. All three markets are pretty far off from contract highs in those commodities as it is. There is plenty of upside in all three markets. How much? I don’t know.”

— Adam Peleshaty reports for MarketsFarm from Stonewall, Man.

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