The Associated Press story on the PPI ends with:
The increase in food costs reflected higher prices for corn, fresh vegetables and beef.
That's from The Oregonian's article "Yes, your grocery bills have gone up: Food costs surged in September". And it reminded me of a chart I forgot to add to yesterday's "Iowa’s August Windstorm Could See $5 Billion In Insurance Losses":
That's bigger than many hurricanes.
Our comment at the time was:
"Iowa's corn yields could be cut in half where hurricane-force winds flattened fields"
The tornado warnings and knocked-over trees in Chicago got the headlines but it looks as if the real damage was done in Iowa.
And the chart? Corn, note the date of the bottom
Friday August 7(red) and Monday August 10 (green), at 307 1/4 and 307 1/2 the latter being the day of the windstorm. The tall green candle was on the 13th, the day of our "corn yields" post and since then corn prices never looked back
Now going forward, corn is an input cost into both cattle and pig prices and fuel (ethanol) prices, which is why we ended that insurance losses story with: "And that's not counting the higher food prices, both direct/immediate and coming down the pike through the supply chain."
However! Looking at page 2 (final demand goods) from the Bureau of Labor Statistics release (31 page PDF):
Final demand goods: The index for final demand goods increased 0.4 percent in September, the fifth consecutive rise. Nearly two-thirds of the September advance is attributable to prices for final demand goods less foods and energy, which climbed 0.4 percent. The index for final demand foods jumped 1.2 percent. Conversely, prices for final demand energy declined 0.3 percent.
Product detail: A 14.7-percent rise in prices for iron and steel scrap was a major factor in the September advance in the index for final demand goods. Prices for fresh and dry vegetables, residential electric power, corn, beef and veal, and oilseeds also moved higher. In contrast, the gasoline index fell 2.8 percent. Prices for natural, processed, and imitation cheese and for household refrigeration equipment also decreased.
And page 3 (intermediate demand goods):
Processed goods for intermediate demand: The index for processed goods for intermediate demand rose 1.0 percent in September, the fourth consecutive increase. Most of the September advance can be traced to prices for processed materials less foods and energy, which climbed 1.3 percent. The index for processed energy goods moved up 0.2 percent. Prices for processed foods and feeds were unchanged. For the 12 months ended in September, the index for processed goods for intermediate demand decreased 1.5 percent.
Product detail: One-fourth of the September increase in prices for processed goods for intermediate demand is attributable to the index for lumber, which jumped 21.4 percent. Prices for primary basic organic chemicals, electric power, utility natural gas, particleboard and fiberboard, and prepared animal feeds also advanced. Conversely, the index for diesel fuel declined 4.9 percent. Prices for natural, processed, and imitation cheese and for cyclic intermediate chemicals and dyes also fell. (See table 5.)
Unprocessed goods for intermediate demand: The index for unprocessed goods for intermediate demand climbed 3.9 percent in September following a 7.0-percent increase in August. Nearly 60 percent of the September advance can be traced to a 5.6-percent rise in prices for unprocessed foodstuffs and feedstuffs. The index for unprocessed nonfood materials less energy jumped 7.2 percent. In contrast, the index for unprocessed energy materials decreased 0.7 percent. For the 12 months ended in September, prices for unprocessed goods for intermediate demand fell 5.4 percent.
Product detail: One-third of the September increase in the index for unprocessed goods for intermediate demand can be attributed to a 55.9-percent jump in prices for slaughter barrows and gilts. The indexes for natural gas, corn, oilseeds, iron and steel, and nonferrous metal ores also moved higher. Conversely, prices for crude petroleum decreased 9.8 percent. The indexes for raw milk and high grade recyclable paper also fell....
The big jump in hog (barrows and gilts) prices was in most mart due to the culling of the herds earlier this year as the supply chain broke down and pork couldn't move to market.
Lumber prices have reversed:
The price jump in iron and scrap prices was due in large part to Chinese stockpiling (see also copper) and their warehouses are now bulging.
Finally, the intro to last Friday's "Capital Markets: 'Animal Spirits Return'"
We are keeping an eye on the 10-year yield. Although real interest rates are still negative they are less so than a couple months ago and assets that do well in the negative real rate environment (looking at you ZeroHedge gold) will catch on at some point.
Maybe after next week's PPI and CPI are released a short would start to look attractive....
Here's the action in gold today's top tick $1917.5, $1907.5 last, up $12.9:
Top tick on that little red evening star reversal candle on October 12 was $1939 and change which is one more in a series of lower highs since the August peak..
