We kickoff the day with Export Prices MoM & YoY and Import Prices MoM & YoY at 7:30 A.M., Michigan Consumer Sentiment Prel, Michigan 5-Year Inflation Expectations Prel, Michigan Consumer Expectations Prel, Michigan Current Conditions Prel, and Michigan Inflation Expectations Prel at 9:00 A.M., Baker Hughes Oil & Total Rig Count at 12:00 P.M., Fed Goolsbee Speech at 1:00 P.M., and Fed Cook Speech at 6;00 P.M.

Photo by Waldemar on Unsplash

The June release of the Producer Price Index by the Bureau of Labor Statistics showed that price inflation in May eased to 2.2%, down from 2.3% in April. Note that CPI inflation has been flat for the last year (at an elevated level), while PPI inflation has been under 2.5% for 14 months. Of note is the decline in Chinese PPI deflation while raw material prices continue to gain. At present, the CRB is 13% higher than a year ago, following a 14% gain in May, and is on track for the 5^thconsecutive month higher. Raw material prices and Chinese producer prices have been historically been leading indicators for US CPI and PPI inflation. The Central US pattern has a High Pressure Ridge Dominates E Midwest next 7-8 days, cooler/wetter July is desired: North American remains chaotic in nature. Flooding rainfall of 3-6” is forecast for NE, IA, and MN, while incredible heat and dryness blanket MO and areas east of the Mississippi River into June 22. Rapid soil moisture lies ahead for the mid-South and Eastern Midwest, and the duration of heat is important. The EU model clearly shows the positioning of amplified high pressure Ridging. Cooler temps and daily showers ride along the western and northern edge of this Ridge, and US weather into late month will be two-sided. The Ridge is forecast is to relax after June 21-22, but above normal temps will continue across the Delta, TN, KY, and E Midwest. Confidence in the forecast details beyond 7-days is low, but heat will be featured this summer. July guidance is warm/hot. CBOT futures came in slightly lower as traders position for Central US weather gyrations ahead of the weekend. Traders well understand that its July temperatures and rainfall determine US corn yield, but the coming heat/dryness raises concern that a new Central US weather pattern has emerged – that could continue into July. The debate over the July Central US weather pattern will grow in the coming weeks. Global weather pattern by Ag Resources (ARC) has weather adversity surrounding Central US, US, and Australia Islands of yield potential. Closer attention will be paid to central US forecast as July approaches and as unwanted heat impacts the east and regional flooding impacts the north. US weather is also critical this year as sub-trend yields have been recorded in South America, and as droughts continue to develop in Mexico, N Africa, the Black Sea, and key areas of northern China. Too much and lack of heat are negatively impacting winter crop potential in Europe. The US acting as the world’s grain storage facility has been bearish over the last 12 months. Already ARC expects the US to expand its share of global corn and wheat trade in crop year 2024/25. Additionally, there will be little/no room for even modest yield declines following production loss elsewhere. It’s difficult to be overly bullish or bearish until July-August weather patterns are known. Be prepared for weather and market volatility. Commitment of Traders today….. Key the funds net short positions.

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