Consumer Price Index data came in hotter than expected this morning at 3.5%, with core inflation at 3.8%.
The news is weighing on the equities and the dollar has surged as well with fears of interest rates staying higher for longer says Tomm Pfitzenmaier, Summit Commodity Brokerage. “The Fed has a tough job ahead of them trying to keep inflation curbed with higher energy costs and ahead of the November elections,” he says.
Wheat is rallying on short covering says Pfitzenmaier and technically the market looks like it is trying to form a bottom but also on news Russia is slowing exports due to quality issues.
Corn is getting spillover support from higher wheat and crude oil. Pfitzenmaier says that market is also supported by expectations of lower ending stocks by 70 million bushels in the USDA report on Thursday.
That may be offset by a larger Brazil corn estimate from Conab and maybe even USDA, as the second crop corn area has seen improved weather, with more rain in the forecast.
Some private estimates have already raised both Brazil’s corn and soybean crop.
As a result, he says soybeans are also lower with the same concerns about Conab raising Brazil crop estimates and despite 9.3 mb of new crop export business.
Traders are also expecting a slightly higher ending stocks figure from USDA at 319 million bushels.
So, the entire grain complex is positioning ahead of the USDA reports and watching weather in the U.S. for planting and well as in South America.
Cattle futures set back early on profit taking by the funds and hedge pressure with another case of Bovine Influenza A in a New Mexico dairy herd.
However, futures quickly came off lows to trade mixed. Pfitzenmaier thinks the market is oversold and trying to stabilize.
Hogs are mixed but due for a correction after more contract highs were hit Tuesday. He says producers should be looking at some of these higher prices as a place to hedge.
