Commodity price inflation
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Started by wglassfo - Aug. 2, 2021, 2:33 a.m.

What does the forum think. Will all the extra money being  passed by congress and spent on what ever the administration thinks and if this happens. Looks very likely some large spending will happen. Just a question of how much.

Will this extra money printing work it's way into commodities and even higher prices, which most of us call inflation or have commodities had  inflation already priced in the market

I am mostly looking at grain prices

I know demand has an influence but could the dollar work downward over time as the money enters the system and how soon could this happen if it even happens.

I know our COP for next yr will be much higher and doing a budget for next yrs COP the price of grain looks good for 2021 expenses but not nearly so good for 2022. I try to sell grain for enough to pay the the current yrs COP which means I look a yr in advance, as I pay cash for all expenses as the bills arrive. Am lucky to have built up an amount of money over the yrs to pay when the bill arrives with no bank loan. This means I look ahead at least one yr for COP

If grain price is lower by just 1.00/bu [which it is currently] some COP production numbers will not look so good. Granted I expect a healthy amount for living expenses, profit etc from the grain sales. I don't do this to just break even on COP

Thus I wonder about future commodity prices and inflation due to trillions added to this yrs Federal budget which will likely be monetized

Comments
By metmike - Aug. 2, 2021, 8:41 p.m.
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I'm tied up but this is another great topic you're introducing Wayne..............thanks again! Mike


Comments please

By bear - Aug. 3, 2021, 8:27 p.m.
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it depends...

if you increase money supply by 20% this year,  that does not mean that all commodities go up by 20% this year.  sometimes the money goes elsewhere first.  maybe into higher stock prices.  maybe into trade deficit.  maybe into higher home prices.  but... eventually, if money supply doubles,  then non-renewable resources will double over the long term.  

renewable resources are a different story.  for example... if you adjust for inflation,  then wheat prices have gone down about 95% over 200 years.  

but for gold and oil...  

from  1950 to 1980, money supply went up about 1000% and oil went up about 1000%. (roughly).

from 1960 to 1990, money supply went up about 1000%,  and gold went up about 1000%. (roughly). 

By bear - Aug. 3, 2021, 8:30 p.m.
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the more important consideration...

when we tried to stick to the gold standard,... wages went up more than inflation for well over 100 years.

ever since the early 70's (final end of the gold standard),  inflation has risen faster than wages.  (for 50 yrs now). 

this is the one most important thing that liberals, and central bankers (keynsians), and most politicians do not understand.  

By wglassfo - Aug. 3, 2021, 9:18 p.m.
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Tks bear

I was just doing some back of the envelope COP for next yr and what price I needed for sales

I know COP has very little correlation to price, but I also remember corn at 1.00 and today's price

Each price increase seemed to come and stick until a new, higher price

Of coarse one has to average the up and down to find an average

I decided, even with increased COP for 2022 corn production, today's price offer for 2022 delivery, "here", will pay the 2022 bills assuming an average 2021 yield , which will go in the bin for future delivery.

Thus I made my 1st new crop sale and will hope for better, average prices later. However, I will take a price that pays the bills as "Hope" can lead to disappointment. I could have sold for 30 cents higher, earlier in the yr but my yield was very much in doubt, at that time

In SA Brazil corn farmers may not be able to deliver on sold contracts for safrina corn delivery, due to dry and frost. Buying corn to fill a contract is not much fun and extremely hard on the bank acct.

Seasonally, as we approach harvest, price declines. This was evident as one end user I called for various delivery month prices, had "no bid" except fall delivery,. The corn buyer was assuming a lower harvest price, due to the inverse price action and other thoughts the buyer may have had.

I was able to find another buyer, with a bid, for future, 2022 delivery

Inflation has become one more variable to consider when selling my crop, as inflation in most previous yrs was much lower