Could Stagflation, Rather Than Recession, Happen Next?
This week’s ag analyst’s watchlist:
- U.S. Debt Ceiling An agreement in principle was reached over the weekend to raise the debt ceiling and avoid a U.S. government default. The next step is for Congress to approve the measure this coming week prior to June 5th, the purported date when the U.S. government will run out of funding.
- Hurricane Season NOAA forecasters are predicting a near-normal hurricane season with 12-17 expected large storms (14 is normal) between June 1st and November 20th.The record was 30 storms in 2020. Key risk = property replacement costs continue to rise with still high asset values, labor shortages and building cost inflation.
- Inflation & Interest Rates From April 2022 to April 2023, consumer prices for all items less food and energy increased 5.5%. Markets are getting concerned that the Fed may hike rates by another 25 bps at the June meeting to help accelerate a further downward move towards its 2% inflation policy goal.
- Japan Monetary Policy Japanese parties represent are a very large foreign holder of U.S. Treasuries. If the Japan central bank decides to allow domestic interest rates to rise, Japanese investors could sell U.S. Treasuries and repatriate money back to Japan, causing U.S. yields to spike unexpectedly.
Numbers of Interest
1.3% Second estimate of U.S. growth in Gross Domestic Product, up from initial estimate of 1.1%
-6.8% Estimated decline in U.S. corporate profits during 1Q 2023, following a 2.7% decline in 4Q 2022.
$3.58 National average cost of gasoline per gallon on Memorial Day 2023 vs. $4.61, a decrease of 22%.
24.6% Gain in NVDIA’s share price last week following an earnings beat that contained 66% revenue growth and positive comments about AI growth.
19.3% Equates to the year/year increase in UK food prices report for April; core inflation also rose in that nation to 6.8% y/y in April from 6.2% in March
58% Growth in Chinese auto exports during 1Q 2023 (Russia was a big buyer), which overtook Japanese automobile exports for the first time. China is also reportedly the largest exporter of Electric Vehicles (market share of 35% at the end of 2022 vs. 25% in 2021.)
Upcoming Events
May 29 Markets are closed in observance of Memorial Day, honoring those that served and continue to serve and protect our nation.
May 30 USDA Crop Progress report; Case Shiller National Home Price Index, Conference Board Consumer Confidence Index
May 31 Congress considers debt ceiling deal; ISM Chicago Business Barometer
June 1 USDA Grain and Oilseeds Crushings Reports; ADP National Employment Report and ISM Manufacturing Purchasing Managers Index (PMI)
June 2 BLS Non-Farm Payrolls report; USDA Weekly Export report
June 4 OPEC+ meeting to discuss 2H 2023 production
June 7-9 Cultivate, Bushel and Grand Farm Innovation Week in Fargo, North Dakota (Zuckerberg speaking on panel at Cultivate); WASDE June 9th
June 13-14 Federal Reserve Open Market Committee (FOMC) June meeting and interest rate decision
June 27-28 The InfoAg Conference. St. Louis, MO.
June 30 USDA Grain Stocks report
Kenneth Scott Zuckerberg is Lead Industry Analyst, Farm Supply & Biofuels, CoBank.
