Be careful of what you wish for. The Federal Reserve wanted inflation and inflation is what they got! The Feds plan to restore activity to the economy by printing money and inspiring people to spend may have hit what you might call a reality check. While after a very weak jobs report showing that the economy lost 9,500 jobs, increasing the odds of quantitative easing, a report released simultaneously from the Department of Agriculture shows the perils of this policy. The USDA dramatically lowered its corn stocks to the lowest level in 14 years. Corn shot up to the daily price limit sending shockwaves across the grain complex and the stock market as well.
The Wall Street Journal reported that, "A steep cut to U.S. corn-harvest estimates triggered a rash of trades by investors who bet that tighter corn supplies could keep rippling through the stock market." "Analysts called the U.S. Department of Agriculture report a shocker. It shaved a record 6.7 bushels per acre from last month's corn-yield estimate, pushing the figures well below consensus expectations and stirring worries of tight supplies and higher prices."
And it was not just corn. We saw limit moves in cotton, soybeans, wheat, oats, and also sharply higher prices for energy. These sharp increases continue the sequence that will put a monkey wrench in the Feds plan to create inflation. With unemployment being as bad as it is, the Fed just increased the cost we'll all pay for heating our homes, filling up our gas tank and feeding our stomachs. Real supply tightness and the impact of quantitative easing could deal a double blow to an already struggling consumer. Still the Fed will press on with printing more money and keep their foot on the accelerator because at this point they feel that they have no other choice.
Have a great Monday in a great trading day. Remember that this week we're going to see a delay in the Department of Energy's supply report that comes out normally on Wednesday will be released Thursday. Also beware of some early closings in certain markets because of the Columbus Day holiday.
Phil Flynn is senior energy analyst for PFGBest Research and a Fox Business Network contributor. He can be reached at (800) 935-6487 or at firstname.lastname@example.org.