CPI comes in hot, creating risk-off with higher interest rates coming.
After a push higher Wednesday evening when China’s market opened at 8 PM CT our time, grain futures turned lower and are sharply lower in some cases this morning as the national “sell grain after crop report” day is here. The US dollar is sharply higher after the CPI came out hotter than estimates, shoving the stock market down 500 points early this morning, with the dollar trading at 113.75, up $0.53.
The CPI rose .4% month over month (double expectations) and up 8.2% year-over-year, which was hotter than the 8.1% expectation. This marks 28 straight months that the CPI has gained and is the highest since August 1982. Not only will interest rates jump ¾ of a percent on November 2, but there is also now a 60% probability in the debt markets that predict a ¾% jump in the December meeting. This has the US dollar heading back toward recent highs.
Along with the US dollar that will continue to hurt exports, the Mississippi River continues to have flows decline, with dredging operations continuing to expand. Barge traffic is building as freight rates soar, putting pressure on grain River basis bids. The outright cost of getting grain to the Gulf is expensive, with FOB soybean offers now $2.80 over. The shockingly high five offers and the surging dollar are hitting US export market demand. Hopefully, the rail strike that could now occur on November 19 can be averted again.
Arid weather will be maintained for the Central US with active harvest while several cold shots in the growing season progressively farther south the next week. Some showers will dot NC Midwest for another 48 hours, but rain accumulation will be less than ¼ of an inch. US soybean harvest has pushed beyond 50% this week, with corn anticipated to do the same next week.
Live and feeder cattle closed firm on Wednesday but are set for a lower start today with the sharply lower outside markets. Cash markets are otherwise quiet through midweek, with offers in the South quoted at $146-147. Cattle slaughter that mid-week totaled 384,000 head, down one thousand from last week but still 20,000 head more than a year ago. Box beef values were firm, with choice and select gaining $1.41.