Eric King and I have been discussing this on our recent KWN Weekly Metals Wrap interviews but it seems to have gone unnoticed by many in the financial press until now.
While the Continuous Commodity Index ( CCI ) has been moving lower again, this is more a function of the outflow of hedge fund money from the sector as they jam into the equity markets, the obedient lapdogs of the Fed that they are. The rest of them have been too busy getting whipsawed to death in the commodity markets.
With current stocks of both corn and soybeans tight, and energy costs remaining stubbornly high, it was just a matter of time before those at the final end of the pipeline had no choice but to pass on those costs to the consumer if they wished to remain in business.
Keep in mind that high gasoline and diesel prices impact the cost of food from a transportation viewpoint ( trucking them to market ) and from a planting point of view ( running tractors and other farm equipment requires fuel).
I am of the opinion that the rise in the broad US equity markets is more a case of paper asset inflation than anything connected to a true signal of strength in the underlying US economy. After all, that freshly printed money has to go somewhere and why not into stocks. In an ultra low interest rate environment, the Fed can easily herd their lapdogs into stocks to prop up that all-important "economic indicator".
As it becomes more clear to others that the need for continued accomodative monetary policy is the only option left for the Fed ( let them even hint at trying to remove it and watch what will happen to their beloved equity market rally), gold will get its legs back under it and stabilize prior to making another leg higher.
Food inflation seen back on the table as prices rise
* Strong correlation with high oil price* Corn, soybeans gain on physical markets in March -FAO data
* U.S. soybean futures jump in March on tight supply concerns
By Svetlana Kovalyova
MILAN, April 5 (Reuters) - World food prices are likely to rise for a third successive month in March, and could gain further beyond that, with expensive oil and chronically low stocks of some key grains putting food inflation firmly back on the economic agenda.