- “Reflation” is a topic on every economist’s mind. The chart below reflects world inflationary trends since 2000 with a conservative forecast for 2017 of 3.4%. The New Year looks to be the first time since 2011 that inflationary pressures will build. Since then, the big worry has been stagflation and deflation due to growing world debt, aging western population demographics, and the displacement of jobs via technology. That has all changed with new confidence in the US political leadership amid the mass of $29 trillion of QE that has been pushed by Central Banks. This reflation makes being bearish raw materials a more risky proposition into 2017.
- Technical selling has been the feature in Chicago markets today with the soybean complex taking the bearish lead as yesterday’s $10.20 support level gave way as did a plethora of other support levels including the 50 day moving average. Sell stops triggered and markets fell and the complex looks heavy into the close tonight. Sharp selling in soybeans has impacted the grains, which have also lost ground; Mar ’17 corn futures have tested support, as has wheat, and whilst fund selling in grains is not as robust as in soybeans it remains tough to shrug off 15 plus cent losses.
- We have seen a snap tender by Egypt’s GASC to purchase wheat, and the results are still awaited as we write this. Doubtless we will have a result tomorrow, and will update accordingly.
- It has been down and out throughout today’s trading with fresh fund selling expected near today’s close. China is not showing interest of supporting the market on this dip (yet) and fund related selling could emerge in tropical oil markets. We would argue that new rallies will surface in 2017 on inevitable S American weather scares. Our view is that a broad trading range will continue through until the USDA Crop Report on January 12th. This is not a break we would be inclined to sell heavily, if at all.