Commodity Futures Trading

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CPI Excludes Food--Have You Seen the ETF DBA?
By: Mish Schneider | February 14, 2023



Maybe it's just Valentine's Day, so the food and commodities market sees a push to chocolates, flowers, and fine dining.

And maybe not.

The CPI came out with an unexpected rise...but goods remained softer. Services on the other hand, rose. However, the CPI excludes food and energy prices.

We see no relief in many of the agricultural commodities in the Investor DB Agricutural Fund ETF. The underlying index includes corn, soybeans, wheat, Kansas City wheat, sugar, cocoa, coffee, cotton, live cattle, feeder cattle, lean hogs, and, most recently, livestock.



The investment seeks to track changes, whether positive or negative, in the level of the DBIQ Diversified Agriculture Index Excess Return™ (the "index") over time, plus the interest income from the Fund's holdings of primarily US Treasury securities and money market income less the Fund's expenses.

If you want to track how the Fed is doing controlling real inflation, regardless of the inverted yield curve, the rise in long bond yields or even the U.S. dollar holding support...

Before we review the chart, our quant models have lots of commodities holdings. In particular, the Sector Conservative, Sector Moderate, and GEMS models hold metals and oil exploration. Interestingly, we also hold SOXL or the 3-times leveraged Semiconductor bull (since January 11th).

Chips and commodities are where it's at right now. That makes chips as valuable as say, sugar (one of the largest holdings in DBA). And speaking of sugar, the futures are holding recent highs. Another blast higher in sugar and more chaos could ensue, as we have written about many times. Here is a timely article written in April 2020!!!

The CPI number excludes food. However, to date, while food prices have declined from the peak in July 2022, food inflation sits at 10%. Food at home is 11.3% and food away from home at 8.2%.

Circling back to the DBA chart, the price rose to clear all of the prior action since October 2022. However, the 200-day moving average looms large as resistance with today's high. Also noteworthy is that DBA is now outperforming the benchmark according to our Leadership indicator.

Real Motion had a breakout and diversion to the upside, as the momentum cleared over the 200-DMA and popped to new highs not seen since last September. The diversion is that the momentum indicator cleared the 200-DMA while price has yet to confirm. Something to watch out for.

With the four indices still rangebound, these continuing bullish trends in the most essential thing on the planet--FOOD--should keep those focusing on A) disinflation and B) a fed pivot a bit quieter.

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