It appears that commodity prices are now rapidly escalating toward round two of inflation. Recent Dollar gains have stymied, and commodity prices, lead by oil, are moving rapidly higher. Grains have been among the most subdued in recent weeks, but with soybeans, corn, and wheat all forcefully higher in overnight trading on good volume, they appear to be poised to move to even higher highs down the road. Soybeans and wheat have moved only modestly, but corn is up more sharply.Corn (see the chart) has reached fresh all-time highs overnight. Furthermore, the USDA crop reports that were released this morning are also quite bullish for prices. Corn production would have to increase 33% next year just to meet U.S. government expectation. 60% of the U.S. corn crop would have to be planted in the next 3 days in order to meet demand expectations for this year. That's not going to happen, so the corn crop this year is likely to disappoint. Elevated prices, however, are also starting to rein in demand.
The USDA report is also bullish, with the protests in Argentina resuming upon the complete breakdown of talks between farmers and the socialist government. Weather, however, is contributing to good harvests across South America.
