The CPI comes in a touch lower, dropping the US dollar value.
Overnight weakness in commodities was erased this morning as the CPI, which came out at 7:30 a.m., was considered friendly for risk-on and a negative price reaction for the US dollar. The US dollar is down 1.88 at 108.64 after the data release. CPI data came in up 7.7% versus an 8% estimate, the core CPI was up 6.3% versus a 6.5% estimate, and month over month, the CPI was up .3% versus an estimate of .5%. This created a violent rally in equities, metals, and energies within a second of the release of the data.
It’s still anticipated that the Central bank will raise rates by .5 or .75% in the December meeting, with another rate hike likely in 2023. The market is celebrating the prospect that the current rate increase cycle may start to slow after the new year.
It’s been reported that high-level Russian government officials are heading to Geneva, Switzerland, to negotiate whether the Ukraine Grain Export Corridor will stay open after November 19. The Russians are seeking and pressing that a state bank of Russia can issue country Letters of Credit to boost grain/fertilizer exports. The US and NATO members will demand another Western bank act as a watchdog to ensure the weapons are not being purchased. Along with the Black Sea movement, Ukraine has now solidly maintained an export pace of 3 MMTs of grain across European borders, which dulls the impact of ending seaborne trade if there is an impasse on extending the corridor.
Saudi Arabia’s tendering for 595,000 MTs of world wheat for April into June. Also, overnight the Rosario Argentine exchange lowered their wheat crop estimate to 11.8 MMTs, the smallest since the 2015 drought and down from prior forecasts of 13.7 MMTs.
Near-normal rainfall and temperatures are forecasted over the next two weeks for both Brazil and Argentina on the EU/GFS models. Starting Friday, near daily rainfall returns to northern and central Brazil, with the weekend looking wet for S Brazil/Argentina. High temps will be near-normal, with readings in the 80s to low 90s.
Live cattle were lower yesterday after the initial cash trade got underway, with sales in Kansas and the Texas Panhandle quoted at $150, which was steady with the prior week. There was limited activity reported in Nebraska or IA/MN. Today’s outlook looks firm with the explosive outside markets for equities. The November WASDE report raised the price forecast for all of 2023, with the second quarter forecast up $2 at $154, which would be the second highest on record. The CME cash equivalent this week is suggesting a price higher than $160. Cattle slaughter this week is 4,000 head fewer than last week but still running 14,000 head more than a year ago.