Commodities/Where are we?

“We’re trying to exploit people’s reaction, which is embedded in prices and leads to trends.”

Inflation

There is growing evidence to support the my thoughts that inflation may be here to stay, we have had this thought since the start of the super cycle in 2020. Check out our monthly digest in October 2020 https://www.aaoresearch.com/post/monthly-digest-october-2020 and https://www.aaoresearch.com/post/monthly-digest-november-2020 (I used audio notes for my analysis back then so make sure you click on those).

The final steps required to achieve the Federal Reserve's mandate for “price stability” (LOL) could be particularly challenging without an economic catalyst. Despite initial signs of a rebound in productivity and a slowdown in wage inflation, these have proven to be temporary. Even with the Federal Reserve Chair Jerome Powell's optimism about "supply-side healing” The persistent nature of these economic conditions suggests that Chair Powell might soon need to reconsider his stance based on the data, indicating that the road to slowing down the inflationary train might be longer and harder than previously anticipated.

Maybe this leads the Fed to decide that inflation should target over 2% (I think they will say 3%) going forward.

They will say… It will be good for us!

Ha

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Agriculture

This week, the wheat-producing regions of Russia and Ukraine experienced frost, compounding the challenges posed by earlier dry conditions. These weather conditions are expected to reduce Russia's wheat output, and it is already in decline.

Weather volatility remains a significant concern and is projected to continue for at least another decade. Recent extreme weather events, including drought and frost in Ukraine and Russia, flooding in southern Brazil, and unprecedented heat and drought in northern Brazil, have sparked a surge in grain markets.