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Economist: Inflation rate rises to 3%, could be bullish for commodities

An ag economist says farmers should monitor grain futures as inflation continues to increase.

Consumer prices rose half a percentage point in January and University of Missouri’s Ben Brown says the commodity markets could benefit. “There’s some evidence that suggests that commodities follow the long-range gauge of inflation. If you see a period where inflation is starting to heat up, we tend to see commodities follow that.”

He tells Brownfield that occurs because some traders and investment firms use commodities as a hedge against inflation. “The sentiment is changing to where even consumers and market participants are expecting annual inflation to be higher than where they expected just a couple months ago. I think that could be bullish and supportive to the commodity markets for a period of time just as people rebalance.”

Brown says the inflation rate rose to 3% in January, which is the highest rate in the last six months.

He made his comments during Brownfield’s Weekly Commodity Market Update, which can be viewed below.