Market Analyst: Inflation is having a huge impact on farm commodities

By Ray Grabanski
Special to the Farm Forum

With recent talk about inflation at the federal government level and beyond, it's worth noting that December corn during harvest is up 40 cents a bushel since Oct. 20.

December wheat is up 52 cents a bushel, and Minneapolis wheat is up $1.

Inflation is a big, big deal in markets, and that is essentially what billionaire hedge fund manager Paul Tudor Jones meant when he said last month that the government is creating, not fighting inflation.

Inflation has gone from 1.4% annual rate when Donald Trump left office, to more than four time higher at 5.9% within nine months of Joe Biden's presidency

Do not miss this important fundamental. It might explain 80% of market movement the next year. With fertilizer inflation over 100% for most products, that's why corn and wheat are rising fast while soybeans are not.

There's some light rain and snow falling in parts of Colorado and Kansas, and light rain in parts of eastern Kentucky, Tennessee and the East Coast. But other than that, it is a relatively dry forecast the next 14 days, with below-normal rainfall in the coming week, but slightly wetter (below-normal to normal) precipitation in days eight through 14. However, temps remain above normal for the coming two weeks in the northwest two-thirds of the U.S.

Only the Southeast will see below-normal temperatures and normal to below-normal precipitation in the coming week.

Final insurance prices for corn were $5.37 a bushel vs. $4.58 in February price, up 17%. And soybeans were $12.30 per bushel vs. the $11.87 February base, up 8%.

November yields from StoneX, a market analysis company, are higher with corn at 177.7 bushels per acre, up 100 million bushes overall, and soybeans at 51.9 bushels per acre, up 50 million bushels on the whole.

Export commitments so far are down 37% for soybeans and for 22% corn compared to last year. So combined with larger yields and slow exports, the grains could have some more negative news in the U.S. Department of Agriculture November report.

Still, oats, hard red spring wheat and cotton are roaring higher along with crude oil and dragging corn and soybeans higher in spite of worsening fundamentals. Of course, inflation is the common thread in all commodities right now, and the expectations of traders seems to be that inflation will become somewhat out of control in the U.S.

Usually, rallying commodities of all types indicate rapid inflation is coming, and that is exactly what the markets are telling us right now.

Corn harvest is 74% (8% ahead of normal), with soybeans 79% harvested (2% behind) in this week's crop progress report. Sorghum is 80% harvested (10% ahead), sugar beets are 87% harvested (3% ahead), and winter wheat is 87% planted (1% ahead of normal).

Winter wheat is rated at 45% in good to excellent condition (down 1% this week), but still above last year's 43% rating.

Perhaps more significant is topsoil moisture gaining 6% to get to 71% rated adequate/surplus (vs. 62% last year), and subsoil also up 6% to 64% rated adequate/surplus (vs. 56% last year).

The U.S. is in much better shape heading into  2022, as much of the northwest Corn Belt soil moisture levels have been restored this fall.

But inflation tops all the fundamental news, at least this week. Even though many fundamentals point down, the huge inflation impact on commodities is very prevalent. Perhaps that makes sense when one looks at the dramatically higher prices of fertilizer for the 2022 production year.