Inflation looks like it may be cooling when you look at last week’s Consumer Price Index which was at only 3.3% annualized.
What the Fed does with interest rates the rest of this year will impact what it costs for farmers to borrow money. However, it could also impact the markets.
A lower interest rate environment moving forward could continue to bring money into outside markets like the stock market, which is already making new highs. That can mean less speculative money going into commodities, but that’s not always the case when it comes to agriculture.
Darin Newsom, Sr. Market Analyst, Barchart, says, " I don’t think grains are a great inflation read because commodity markets have varying degrees of elastic demand and inelastic demand, and you know quite honestly folks around the world need to eat. So, there’s always that underpinning of support you know for global grain.”
He says other outside and soft markets are providing mixed signals about inflation. The energy markets have been flat, while inflationary buying has continued in metals such as gold and copper.
“Then we’ve got copper which is another economic indicator and silver which is a also a hybrid of the two. And also looking at crude oil. Crude oil hasn’t done anything despite all the bullish headlines that have been thrown at it. The West Texas intermediate market is still just setting there it hasn’t done anything for the last number of months.”
The dollar index is still relatively high but if inflation continues to ease that could also devalue the dollar making U.S. goods more competitive in the export market and spurring demand.
