Inflation SPIKE - What Does it Mean for Corn Prices??

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📈 Inflation Hits 3-Year High — Consumer prices jumped 4.2% year over year in May, the largest annual gain since April 2023, driven largely by the energy shock from the Iran war. With inflation outpacing wages and the Fed expected to hold rates steady next week, traders are asking, could grains rally sharply like they did in 2021-2022 if inflation accelerates? 

⛈️ Severe Weather Pounds the Corn Belt — Hail, damaging winds, and tornadoes swept across the region Wednesday, with the active pattern expected to persist through Friday and flooding risks mounting. Temperatures are forecast to moderate by the weekend, followed by below-normal readings next week. 

🌱 Soybeans Snap Losing Streak — After eight straight sessions of declines, Nov26 soybeans rebounded ~7 cents to settle near $11.39, lifted by crude oil strength amid Middle East tensions. Dec26 corn edged ~2 cents higher to close near $4.47, while wheat posted modest gains across most contracts. 

📊 USDA Report Day — The monthly Crop Production and WASDE report drops today at 11am CST, with traders expecting no significant changes to US or global ending stocks. Corn exports could be revised higher, while frustration over the lack of Chinese soybean purchases raises the possibility of a demand cut—though it may be too early for the USDA to act. 

⛽ Ethanol Production Holds Steady — Weekly output came in at 1.1mil barrels per day, unchanged from the prior week, while stocks declined 1% to 24.45mil barrels. Margins remain strong across the Corn Belt, running 25 to 60 cents positive per Reuters data. 

🥩 Beef prices keep climbing—ground beef hit $7.06/lb in May (+13% YoY), and steak surged to $12.80/lb (+16%) as the US cattle herd sits at its lowest level in over seven decades. With more than half of cattle country in drought, meaningful herd rebuilding is unlikely anytime soon — though analysts question how long demand can hold as inflation erodes purchasing power.

Transcript

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SPEAKER_01 0:08

Morning guys. It's Thursday, June 11th, 5 23 a.m. Central Time. Grain markets are mixed this morning. December corn futures down one at 445 and three quarters. November soybeans up one and a half at 1140. July Chicago wheat down a quarter cent at 587 and a quarter. July Kansas City wheat down one and three quarters at 628 and three quarters. September spring wheat up one at 644 and a half. Mackenzie, I was looking at our YouTube subscriber count this morning.

SPEAKER_00 0:36

Yeah.

SPEAKER_01 0:36

34,995. We're five subscribers away from 35,000. I am leaving to go on vacation for a week. And when I get back from vacation, if we're not at 35,000, I'm not

Inflation, Consumers, Corn

SPEAKER_01 0:49

even doing a show ever again. So you better subscribe to the damn channel this morning. Okay, uh, let's get into the show. We had a nasty inflation print out yesterday.

SPEAKER_00 0:58

Consumer prices climbed 4.2% year over year in May, up from 3.8% in April, marking a third straight monthly increase and the largest annual gain since April 2023. The rise in inflation is being driven largely by the energy shock tied to the Iran war. Inflation has now outpaced wage growth for several months, squeezing household finances and raising concerns about broader economic growth. When asked about the uptick, President Trump said inflation will fall quickly once the war ends. The Fed is widely expected to hold interest rates steady at next week's meeting, though many analysts believe the Fed could raise rates before the end of the year.

SPEAKER_01 1:37

4.2% annualized inflation. This means that the basket of goods and services that BLS tracks as it relates to the consumer is up 4.2% versus the same period last year that's the highest in three years. You look at this chart, the inflation target of 2% that the Fed uh supposedly holds, that's nonsense. They don't want a 2% target. They could have got there through higher rates if they wanted to. They just didn't want to do it. So this basket of goods and services, supposedly uh purchased by urban consumers, is of course as high as it's ever been. And that's almost always the case. Uh, this particular index almost never goes lower, only during like recessions and depressions, basically. Uh so CPI, this basket of goods and services, supposedly, according to the government, is up 29.5% since February of 2020, which is your last pre-COVID month. Uh, in my experience as a consumer, uh living near an urban center, inflation is up, it's 40 to 50 percent since COVID, would be my personal experience. Um, you look at kind of an itemized breakdown. This is Charlie Ballell on Twitter. Over the last year, uh fuel up 40, or I'm sorry, 58.9%, gasoline up 40.5%. Those are your two big items that have resulted or caused the uh inflation, but it's starting to bleed into everything else. We've talked in the past about how, you know, everything moves on a truck and diesel prices are really expensive, and therefore everything is going to start to get really expensive. Um, here's over the last five years. Look at that pound of coffee up 108% over the last five years. You know, that's a big input cost for our show here, is uh is coffee. And that probably goes for a lot of you guys also. So nothing's uh nothing's getting cheaper. And it brings us back to this the old K-shaped economy. McKenzie mentioned wages and wage growth over the last year is only 3.4% and inflation is 4.2. So if you're in the lower end of that K and you don't own assets, you don't own stocks, you don't own real estate, you don't own gold or farmland or whatever, uh, you are out of luck because wage gains are not keeping up with inflation, and uh you're not privy to the big spike in assets, and you're just in a very, very difficult spot. So the economy is very much bifurcated, more so than ever now. It's it's it's been like this for a long time, but more so than ever now. Okay, so what impact does this have on you guys and our grain prices and that sort of thing? Uh the inflation, of course, hurts uh the farmer just like everybody else. I mean, farmers got to live. So, you know, just because you're not living near an urban center doesn't mean that inflation and the things that you buy, whether it's groceries, gasoline, those things are all uh expensive. So this is very much problematic. You talk about the phrase wage growth, and farmers are like, what is that? You know, haven't seen that in a while. Um, this is the chart that I wanted to show you guys CPI annualized percentage change and corn prices. Uh, one thing I'll note here is that the corn price of 446 that's on this chart, that's the end of May price because the inflation print is the end of May. So I wanted the charts to kind of line up. But his in the past, over the last call it 10 years, there's been a pretty strong correlation between uh big moves in inflation and deinflation. Like when we had the big inflation spike in 2021 and 2022 post-COVID, and it was because first of supply chain disruptions, and then because of money printing was really, I think ended up being the bigger deal, corn prices went right along with it. And it corn had its own story at the time. We had Chinese buying, we had Russia-Ukraine. There was a lot of short crops, there was a lot of things happening. But uh, you can see that they they do tend to move in tandem to some degree. And I would venture to say that if this inflation becomes uh accelerated and it it rises even further from current rates, these commodity, these commodity markets will take notice. I just I mentioned this yesterday. I feel as if financial markets in general, and this is not my opinion, I feel like the market's opinion of of the uh Middle East situation. They feel like it's gonna end sooner rather than later. You look at crude at 89 bucks this morning, you look at the stock market, which yeah, it's corrected, but it's still awfully high. Uh, there's you look at interest rates. The trade,

Severe Midwest Weather and Forecasts

SPEAKER_01 5:44

the global marketplace, seems to believe that this thing is gonna end sooner rather than later. And I don't know if that's the case. It doesn't feel that way to me, but uh that's how things are trading.

SPEAKER_00 5:53

Severe weather continues to sweep across the corn belt with a wave of storms on Wednesday that brought hail, damaging winds and tornadoes to parts of the region. The active pattern is expected to persist through Friday before shifting eastward. With with a threat of multiple storms, many areas are at risk of flooding. Looking ahead, temperatures across the corn belt are forecast to moderate by the weekend, followed by a stretch of below normal readings next week.

SPEAKER_01 6:20

Some nasty stuff expected today across parts of uh Iowa, Missouri, Illinois, southern Wisconsin, all over the place. Um, there were reports yesterday, earlier this week of you know, pivots being knocked down, destroyed, uh, things along those lines. The eight the radar is active this morning. We've got a fairly strong looking system over the uh eastern part of Nebraska, and then another system over, uh call it central, south central Illinois into Indiana. Over the last seven days, there's been a lot of rain in a lot of places, some places missed, but the forecast is wet for the Corn Belt, not as wet for the plains. There's really not a whole lot of rain in the forecast over the next seven days for uh the Dakotas, for Nebraska, for Kansas, places like that. Um the forecast, however, is seen as being bearish. And it's it's not because it's not because it's a guarantee that all this rain equals a big crop. Like all this rain does not guarantee that you're gonna see a big corn crop. We we could run into all sorts of of different problems. The fact of the matter is, though, if you're gonna see one of these crop scare events, like your big June or July rally, it's almost always gonna be on a dry forecast. It's not gonna be on a wet forecast or or a too wet forecast. So I think that that's the deal with the market right now, is the market is is the trade, generally speaking, is painting this thing with some very broad strokes. Rain makes grain, right? That's it's as simple as that this time of year. We could get into August, September, you know, uh crop tour season, crop scouting season. We may find out, hey, there was too many, too much rain in too many places, or you know, planting conditions ended up coming back to bite us in certain areas. That's all possible. But during this time of year on June 11th, you need to see like a really hot and dry forecast to get that sharp crop scare event, like we saw in say 2023, and we just don't have it right now. Here's some really good stuff from our friends at Crop Profit to quantify the situation. Over the next seven days, based on Euromodel data, U.S. corn areas will see 92% of normal rainfall. So no problem there. 146% of normal rainfall expected during the eight to 14 day period. Uh temperatures cool down over the next week. U.S. corn areas expected to be 2.1 degrees below normal on average, and then kind of moderate to more normal type temperatures during the eight to 14 day period. So again, there's

Grain Price Action

SPEAKER_01 8:34

just there is no imminent U.S. weather threat. Doesn't mean the crop's big. It's just there's no there's no threat the way that the trade views it right now.

SPEAKER_00 8:43

After eight consecutive sessions of declines, soybean futures rebounded yesterday with the November 26th contract gaining roughly seven cents to settle near 1139 per bushel. The move coincided with strength in crude oil, driven by escalating tensions over in the Middle East. Corn futures finished mixed with the December 26th contract, edging about two cents higher to close near 447 per bushel, as gains were limited by favorable weather forecasts. Meanwhile, wheat futures posted modest gains across most contracts.

SPEAKER_01 9:14

Let's look at some charts. So D's corn, um, it's cool that we bounced off the lows, but it's uncool that we rejected a trade above 450 each of the last two days. So the the reason for that is is weather, as Mackenzie mentioned. It's just that the forecast is wet. There's been too much too much rain in too many places. And again, it does that does not guarantee a big crop. It just means that the large speculator and the the marketplace in general is is not concerned. They're not concerned right now. They could be concerned later, but typically if you're going to see that that June or July crop scare event, it's almost always on a hot and dry forecast. We just don't have that. Soy market, I think, has acted a little bit better uh by comparison. I still think a test of that 1118 support level underneath the November contract is possible. The funds uh supposedly still net long, about 113,000 contracts. That was the number we had in our daily fund tracker tool, which is in the email every day. So if you guys are looking for real-time fund positioning, uh premium subs, that deal is in the email every day. China, still a question mark. I believe they will buy new crop U.S. soybeans. I don't know when they're gonna start. I think it's gonna happen though. Uh HRW wheat, I still am watching that gap at 609 and three-quarters. I still think that a gap fill is uh

USDA Preview

SPEAKER_01 10:24

possible or even likely at this point. Similar to corn, wheat prices, uh, the wheat market rather rejected some higher price levels in each of the last two sessions.

SPEAKER_00 10:32

USDA will release this monthly crop production and WASDI report here this morning at 11 Central Time. The agency is expected to leave its U.S. production estimates unchanged. Traders are expecting no significant changes to either U.S. or global ending stocks on the demand side for U.S. corn. Any changes will likely come in the 25-26 balance sheet, with exports being the most likely area to be revised higher for soybeans. A lack of U.S. soybean purchases from China could lead to a downward revision in demand, although it may still be too early for USDA to make that adjustment.

SPEAKER_01 11:05

Premium subs. We will have our post-report snapshot video out within 15 or 20 minutes of the report. Uh Pete Meyer will be joining McKenzie for that video because I'm going on vacation, as I mentioned, uh, but we'll have an update for you guys. This report should be a non-event. I don't see anything that's going to be surprising to the trade. As I mentioned yesterday, it's the June 30th report, acreage and grain stocks that is typically the big market mover as far as USDA reports are concerned this time of year.

SPEAKER_00 11:30

If you guys have not checked out our premium content, you sure need to do so. Joe, can you tell our viewers about some of our recent premium videos?

SPEAKER_01 11:36

Absolutely fantastic stuff from Brian Split yesterday. Corn comeback, what will it take? Um, the fundamentals that we talk about on this show, we do fundamentals at technicals, but it's all nonsense. You should really watch what uh Brian has to say about the markets from a technical standpoint, meaning charts. What are the charts telling you? Brian is the best in the business as far as reading the grain charts and what the charts are telling us about price action. He ran through everything yesterday. I did a corn marketing review earlier this week. I talked about everything that I've advised our subscribers to do as it relates to old crop, new crop 2027, and also uh new crop HTAs. There's some interesting stuff there that you should absolutely consider. If you are seeking a simpler approach to your grain marketing, and most of you should be, grain marketing should be uh simplified uh as drastically as possible. Like the the more complicated it gets, the worse you're gonna do. You need to simplify. That's the way that I like to do things. Um, I ran kind of a uh grain marketing horror story last week, and this video got a lot of positive feedback. This was from a subscriber who got out of or exited his corn hedges, didn't sell the cash, exited his corn hedges uh well before the this big drop in prices and he stick to his stomach. And I discussed this through the lens of too many decisions with your grain marketing is bad. You need to make like a limited amount of decisions per bushel that you produce. And I went into great detail on that. If you want to see the premium stuff, go to standardgrain.com. You can sign up this morning. This is a 50, 50, $50 per month subscription. You can cancel it any time, no other fee, no other obligation, nobody'll try to sell you anything else. If you are the decision maker in your farm operation, this is must-watch stuff. If you're not watching it at this point, your neighbor's watching it and you are at a disadvantage, so you better sign up.

SPEAKER_00 13:18

You bet. Yeah, definitely. Yeah, you need to sign up. Most definitely. Uh U.S. ethanol production held steady last week. Weekly output was reported at 1.1 million barrels per day, unchanged compared to the prior week and up slightly versus the same week last year. Ethanol stocks declined to 24.45 million barrels. The print was down 1% compared to the previous week, but up marginally versus the same week last year. According to Reuters data, U.S. ethanol margins remain remain strong across the corn ballot, ranging from 25 cents to 60 cents positive possible.

SPEAKER_01 13:52

Okay, to go back to my advertisement real quick, I want to mention I want to mention something. Uh the people who so we have a lot of farmers that subscribe. Yeah, and I can't tell you guys who our subscribers are, but the pe some of the people who are subscribed to this are sitting in incredibly powerful positions. We have a a number of like like I can't even count how many people who are sitting in C-suites at big ag firms who who watch this stuff every single day. We've got people who are at big trading houses in Brazil, in China, in Ukraine, in Russia, all over the world who are

Ethanol Production

SPEAKER_01 14:26

watching this stuff. So, like if you're if you're not, like why would you why would you not want to be in the same loop as as that group of people? You know, I don't know. You're out of your mind if you don't subscribe. Anyways, um, ethanol production is strong. Very good. This is very good. And uh it's not anything

Record High Beef Prices

SPEAKER_01 14:40

surprising. Ethanol stocks are too high, but they are moving lower uh seasonally as they typically do during driving season. So this is all kind of par for the course type stuff here.

SPEAKER_00 14:49

Beef prices continue to surge. According to the Bureau of Labor Statistics, the average price of ground beef rose to $7.06 per pound in May, up 13% from a year ago. Steak prices have also risen sharply, averaging $1,280 per pound, uh, an increase of 16% compared to May of last year. The rise in prices comes as the U.S. cattle herd sits at its lowest level in more than seven decades. It's unlikely that meaningful herd rebuilding will begin anytime soon, as more than half of cattle countries currently being affected by some level of drought. Beef prices have also supported uh strong consumer. Beef prices have also been supported by strong consumer demand. Though some analysts question how long that demand can hold as inflation continues to erode household purchasing power.

SPEAKER_01 15:40

Beef, also big input for me personally, and uh so much so that the doctor told me after my most recent blood test, he's like, You got to dial back the red meat a little bit. I'm like, what do these damn doctors know, anyways? You know, like do they really are they really that smart? They don't know anything. So is this gonna is this gonna kill the man and that what that's what uh kills the cattle market eventually, McKenzie?

SPEAKER_00 15:59

Uh I I we've That's what they've been saying for years now. We've been talking about it for like two or three years since I've been around on this show. I don't know. I mean, yeah, if inflation gets out of hand, it could dial it back a bit, but beef is king, and like I'm sure you're not willing to give it up anytime soon. And I think a lot of consumers feel that way. So yeah, it's somewhat of a concern, but um, I think there's other issues that are uh more important.

SPEAKER_01 16:21

Stock markets higher this morning, the SP's up uh seven-tenths of a percentage point, is uh removed from the all time highs by quite a bit now. Uh treasuries are mixed, crude oil's down 95 cents at 89.08. Like what there's still action going on in the Middle East, right? But crude market doesn't care anymore. Uh guys, take it easy. I'm gonna be out for a week. Brian and Matt will fill in for me. Mackenzie's the boss uh for a week. Mackenzie, have fun. Uh, we'll see you guys next week.