Pro Perspectives 2/18/21

February 18, 2021

Building on the inflation theme we've been discussing, we had more price data this morning (import and export prices).

Both came in hotter than expected.

Export prices were up 2.5%.  As you can see in the chart below, that's the biggest monthly change on record.  

The monthly jump in import prices was the biggest jump since 2012. 

What's the driver of the hot prices?  For imports, it's oil.  Fuel import prices were up 7.4% from December to January.  So, we're in the early stages of seeing the impact of Biden energy policies on fuel prices.  As we discussed, the "clean energy" plan puts OPEC back in charge of oil prices.  We will still buy a lot of oil.  We will just buy more for foreign sources, and at higher prices. 

On the export front, the hotter prices are driven by agricultural exports.  

Remember, we've talked about China's buying spree of global commodities.  They bought record volumes of crude oil, copper, iron ore and coal in 2020.  They also imported a record amount of corn, wheat and soybeans

What happened to commodity prices the last time China went on a commodities binge in a global recession (a decade ago)?  Prices spiked. 

What's happening this time?  Prices are spiking.  And it's far from over. 

Let's look at corn prices …

And let's revisit the chart of copper prices, which traded to nine-year highs today …