Sorry no Inflation in the horizon
From Bloomberg Mliv, Mark Cudmore
Formerly known as Dow Jones-UBS Agriculture Subindex Total Return (DJUBAGTR), the index is a commodity group subindex of the Bloomberg CITR. The index is composed of futures contracts on
coffee, corn, cotton, soybeans, soybean oil, soybean meal,sugar and wheat. It reflects the return on
fully collateralized futures positions and is quoted in USD.
Ever-cheaper food may wreak havoc for markets next year. It's clear from the Markets Live macro assets survey on WHIS that the consensus is for higher benchmark yields in 2018. That suggests a belief inflation will pick-up.
But food prices are a key input to CPI globally and they continue to fall. Technology and science are making agriculture increasingly efficient and there are plenty of gains still to be made globally. The Bloomberg Agriculture Subindex closed at the lowest level since records began in 1991. And it's unlikely to see relief soon given that the weakness has caught speculators offside. Friday's CFTC data showed that the combined net-long positions for agricultural products increased more than 10-fold in the week ending Dec. 5.
And it really matters. Falling food prices were cited as the core reason why China's weekend CPI release came in below expectations. On the other side of the world, Brazil's latest CPI print came in below all economists' forecasts. This year has seen the measure drop below the target range for the first time since 1999 after the 7th-straight decline for food prices.
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