Commodity Insight

Longtime commodities analyst and columnist Jerry Welch died Oct. 2. His daughter shared the news in a post on X: “Dad unexpectedly passed on Monday. We are in total shock, he was our world.”

A year ago, my column was entitled “Cattle supplies to tighten moving forward.” The day I wrote that column December live cattle futures traded around the $154 level, but a few days ago kissed $192.

The Federal Reserve left U.S. interest rates unchanged this month, waiting to see if the rapid rate hikes since March 2022 will finally push inflation down to their target of 2%.

An important gauge of inflation was released this week, the Consumer Price Index. It showed August inflation above expectations at 3.7% and a new three-month high.

Those who follow my column know I am quite bullish toward the food and energy markets. They also know that my forecast for those markets to turn bullish has not yet come to fruition.

A shortage of food and energy should be coming sooner than later. I fully expect the final quarter of this year and into late 2025 to be a period marked by rising prices for those two basic markets.

The last weekly column I penned in July stated boldly: “We are entering a new era for food and energy prices that will not be solved until 2025, or later.”

When Russia invaded Ukraine on Feb. 24, 2022, Chicago wheat prices rose from $8.85 a bushel to $14.27 by March 7 2022. The rally, however, was rather short-lived.

Several fundamental events have combined in recent days suggesting that stocks as measured by the Dow Jones could drop 50% to 60% from current levels.

There are several interesting theories on the ag and energy markets that have been unfolding the past few weeks.

The Federal Reserve began hiking interest rates more than a year ago to fight inflation. In June 2022, inflation was nearly 9%, but has since dropped to 3%.

The late May to late June period this year was the driest and warmest in history for the United States. It was far worse than what was experienced in 2012, when grain prices rose sharply during the growing season.

The first half of 2023 has come to end and it was bullish for the stock market, and though commodities, per se, remain stuck in a trading range that goes back a year, there were some historic events that did unfold with hard assets.

Watching the various markets move higher on bad news and lower on good news is the order of the day. Lately, there is little connection between logic and reality.

There is no doubt the grain complex has evolved into a full-blown weather market thanks to above-normal temperatures and below-normal rainfall in the U.S. Grain Belt going into the heart of the growing season.