Monday, February 11, 2008

What Inflation?

From IBD:

Wheat futures surged to new all-time highs Friday, driven by short-covering and concerns about dwindling supplies, especially of the high-protein spring wheat traded in Minneapolis.

The March spring wheat contract at the Minneapolis Grain Exchange closed up the 30-cent limit for a seventh straight session. It reached $15.53 per bushel, the highest-ever price for any U.S. wheat contract. Synthetic trade through options indicated the contract was valued at $20 to $21.

Wheat futures at the larger Chicago Board of Trade and the Kansas City Board of Trade settled limit-up as well, and prices at all three markets set record highs.

Let's take a look at the chart.

-- Prices are in a clear nine-month uptrend.

-- All the simple moving averages are heading higher

-- The shorter SMAs are above the longer SMAs

-- Prices are above all the SMAs

-- Prices consolidated from mid-December to the end of January, and have now broken out to new highs.

And consider this news story from the UK:

U.K. factories raised prices at the fastest annual pace since 1991 in January as gains in raw material costs reached a record, limiting the Bank of England's scope to reduce borrowing costs.

Producer prices for goods including chemicals, textiles and food rose 5.7 percent from a year earlier, the Office for National Statistics said in London today. The cost of raw materials increased an annual 19.1 percent, the most since records began in 1986.

``This is shocking,'' said Matthew Sharratt, an economist at Bank of America Corp. in London. ``It feeds concerns about inflation, and will make the Bank of England cautious about lowering interest rates too rapidly.''