May 17th

Market Report

Overnight US markets have dropped back. Better corn plantings have been the driver here. In addition markets are still struggling to process these huge price levels, where is the demand coming from and who can afford to pay these prices when salaries can't keep up with inflation. There are still weather issues in France and the US where wheat plantings are being hampered, but there is no doubt that further along the supply chain business are feeling the impact of the higher raw material costs and they are struggling to pass this onto the consumers.

We knew it was coming but Andrew Bailey has pushed food prices to the top of the inflation agenda. Yesterday he described the food price scenario as 'apocalyptic'. We have been highlighting this for a while and food has always been the item that the governments have not worried about- its cheap and we can keep people fed. This is no longer the case and lower income countries will be hit first and hardest. This will create a ripple effect around the world and lets not forget that North African countries tend to topple leaders if they can't afford food, where will this leave Russia and China?

Ukraine/ Russia still dominates the news and Putin is struggling to get control of the agenda. If he can't get what he wants from this invasion then he will either go more extreme or finally pull back. Bull markets need feeding and it seems most of the bullish news is priced into the market.