Don't loose sight of the forest for the trees - the big picture looks like it could be improving...
Canada Markets
Could Inflation Solve US Debt Concerns?
10/27/2025 | 2:08 PM CDT
By Mitch Miller, DTN Contributing Canadian Grains Analyst
I cannot stress enough that this is in no way political. But the Trump administration might just be working on an ingenious plan to deal with the mounting U.S. debt and debt servicing obligations. At least if you own any assets that is. Otherwise, this could be an ominous warning.
It is commonly accepted that making debt servicing payments out of dollars that are worth less than when originally borrowed (thanks to inflation) helps deal with excessive debt. As more money (on a nominal basis) flows in an inflated environment, the burden of debt servicing is somewhat relieved. Given the debate and concern over the U.S. debt topping $38 trillion, the current Federal Reserve mandated target of 2% inflation may be outdated. And the Trump administration may already be on a path to consider changing that (along with lowering interest rates despite increasing inflation).
Regardless of the side of the debate you are on, Federal Reserve Chairman Jerome Powell's days are numbered with his term as chair ending in May. With that, his influence has already begun to be diminished with the market now pricing in a quarter-point-fed-funds rate cut in each of the upcoming October and December meetings. Up until the September CPI release Friday was followed by strong grain and oilseed markets on Monday, a third quarter-point cut was being priced in for the January meeting; that would have taken the target rate down to 3.25-3.5%. It's worth noting that the odds of the third cut are still very close, and it could be seen by the new year. And all of that despite the September CPI headline and core readings coming out at 3% on an annualized basis. They were expected to hit 3.1% but regardless of being cooler than predicted, they are still trending in the wrong direction for rate cuts considering the 2% inflation mandate.
With the appointment of Trump loyalist Governor Stephen Miran, the pending end of term as chair for Jerome Powell, and the ongoing attempt to fire Lisa Cook, it is widely expected the balance of power will soon be held by those that share in the president's views. Given the forward-looking nature of markets, it's fair to assume decisions will be in line with the administration's plans from this point forward.
With the inevitable shift in power at the Federal Reserve, the need for food and energy prices to fall, helping to lower overall inflation and thus, allowing reduced interest rates (and lowering debt servicing requirements along the way) have diminished. With that, there is an opportunity for the president to improve his popularity among his voter base by improving agriculture trade and prices along with it.
Farmers and farm groups can take some of the credit for that. Following Trump's first term, the administration appeared to believe it helped his popularity when he provided an aid package following the first trade disruptions with China. But the same doesn't appear to be the case this term. When anger boiled over amongst his voter base that they just wanted fair trade and market opportunities, not a check in the mail, the scheduled announcement of an aid package never materialized. Instead, Secretary Rollins was quoted as saying, "We have to get off this hamster wheel of government payment after government payment after government payment. They don't want checks. They want to be able to sell their product," while suggesting the administration is working on restoring trade with China and diversifying global markets with other trade deals. It's likely unanimous that given concerns over current debt levels and funding cuts, it would be much more palatable for everyone should the market be able to pay the farmer a fair price with no aid needed. With that, the last half of October may have just witnessed a major shift in agricultural policy strategy at the White House.
Another clue to the decreasing concern over keeping inflation in check is developments in energy markets. President Trump went from "Drill, baby, drill" as a campaign slogan to allowing his administration to announce early last week that up to 3 million barrels of crude oil would be purchased to help replenish the Strategic Petroleum Reserve. That followed repeated demands that China, India and even European Union countries reduce oil purchases from Russia, despite the impact on price. Then just last week when talks between the U.S. and Russia broke down, stiff sanctions were unexpectedly levied against Russia's two largest oil companies. When all of that was combined with an escalation of attacks between Ukraine and Russia, crude oil rallied almost $7/barrel off Monday's low by Friday's high. Stronger yet (thanks to damage done to Russian energy infrastructure), ultra-low sulfur diesel gained 15.7% in a week.
With that, everything might be lining up to help inflate the way out of the debt concerns -- intentionally or by accident. The political will and fundamental justification for rising grain and oilseed prices. The need to choke off Russian energy exports regardless of the higher prices that result. And the (apparent) diminished concern about keeping inflation down in order to benefit from lower interest rates. My suggestion is to keep an eye on the Bloomberg Commodity Index, I know I will be.
I welcome feedback along with any suggestions for future blogs. My daily comments can be found in Plains, Prairies Opening Comments and Plains, Prairies Quick Takes on DTN products.
Mitch Miller can be reached at [email]mitchmiller.dtn@gmail.com[/email]
Follow him on social platform X @mgreymiller
(c) Copyright 2025 DTN, LLC. All rights reserved.
This weekly continuation chart of the Bloomberg Commodity Index suggests a break higher out of the saucer bottom that's been years in the making could occur at any time. Geopolitical developments would be the most likely driver. Debt servicing capability would be one beneficiary. (DTN ProphetX chart)
Canada Markets
Could Inflation Solve US Debt Concerns?
10/27/2025 | 2:08 PM CDT
By Mitch Miller, DTN Contributing Canadian Grains Analyst
I cannot stress enough that this is in no way political. But the Trump administration might just be working on an ingenious plan to deal with the mounting U.S. debt and debt servicing obligations. At least if you own any assets that is. Otherwise, this could be an ominous warning.
It is commonly accepted that making debt servicing payments out of dollars that are worth less than when originally borrowed (thanks to inflation) helps deal with excessive debt. As more money (on a nominal basis) flows in an inflated environment, the burden of debt servicing is somewhat relieved. Given the debate and concern over the U.S. debt topping $38 trillion, the current Federal Reserve mandated target of 2% inflation may be outdated. And the Trump administration may already be on a path to consider changing that (along with lowering interest rates despite increasing inflation).
Regardless of the side of the debate you are on, Federal Reserve Chairman Jerome Powell's days are numbered with his term as chair ending in May. With that, his influence has already begun to be diminished with the market now pricing in a quarter-point-fed-funds rate cut in each of the upcoming October and December meetings. Up until the September CPI release Friday was followed by strong grain and oilseed markets on Monday, a third quarter-point cut was being priced in for the January meeting; that would have taken the target rate down to 3.25-3.5%. It's worth noting that the odds of the third cut are still very close, and it could be seen by the new year. And all of that despite the September CPI headline and core readings coming out at 3% on an annualized basis. They were expected to hit 3.1% but regardless of being cooler than predicted, they are still trending in the wrong direction for rate cuts considering the 2% inflation mandate.
With the appointment of Trump loyalist Governor Stephen Miran, the pending end of term as chair for Jerome Powell, and the ongoing attempt to fire Lisa Cook, it is widely expected the balance of power will soon be held by those that share in the president's views. Given the forward-looking nature of markets, it's fair to assume decisions will be in line with the administration's plans from this point forward.
With the inevitable shift in power at the Federal Reserve, the need for food and energy prices to fall, helping to lower overall inflation and thus, allowing reduced interest rates (and lowering debt servicing requirements along the way) have diminished. With that, there is an opportunity for the president to improve his popularity among his voter base by improving agriculture trade and prices along with it.
Farmers and farm groups can take some of the credit for that. Following Trump's first term, the administration appeared to believe it helped his popularity when he provided an aid package following the first trade disruptions with China. But the same doesn't appear to be the case this term. When anger boiled over amongst his voter base that they just wanted fair trade and market opportunities, not a check in the mail, the scheduled announcement of an aid package never materialized. Instead, Secretary Rollins was quoted as saying, "We have to get off this hamster wheel of government payment after government payment after government payment. They don't want checks. They want to be able to sell their product," while suggesting the administration is working on restoring trade with China and diversifying global markets with other trade deals. It's likely unanimous that given concerns over current debt levels and funding cuts, it would be much more palatable for everyone should the market be able to pay the farmer a fair price with no aid needed. With that, the last half of October may have just witnessed a major shift in agricultural policy strategy at the White House.
Another clue to the decreasing concern over keeping inflation in check is developments in energy markets. President Trump went from "Drill, baby, drill" as a campaign slogan to allowing his administration to announce early last week that up to 3 million barrels of crude oil would be purchased to help replenish the Strategic Petroleum Reserve. That followed repeated demands that China, India and even European Union countries reduce oil purchases from Russia, despite the impact on price. Then just last week when talks between the U.S. and Russia broke down, stiff sanctions were unexpectedly levied against Russia's two largest oil companies. When all of that was combined with an escalation of attacks between Ukraine and Russia, crude oil rallied almost $7/barrel off Monday's low by Friday's high. Stronger yet (thanks to damage done to Russian energy infrastructure), ultra-low sulfur diesel gained 15.7% in a week.
With that, everything might be lining up to help inflate the way out of the debt concerns -- intentionally or by accident. The political will and fundamental justification for rising grain and oilseed prices. The need to choke off Russian energy exports regardless of the higher prices that result. And the (apparent) diminished concern about keeping inflation down in order to benefit from lower interest rates. My suggestion is to keep an eye on the Bloomberg Commodity Index, I know I will be.
I welcome feedback along with any suggestions for future blogs. My daily comments can be found in Plains, Prairies Opening Comments and Plains, Prairies Quick Takes on DTN products.
Mitch Miller can be reached at [email]mitchmiller.dtn@gmail.com[/email]
Follow him on social platform X @mgreymiller
(c) Copyright 2025 DTN, LLC. All rights reserved.
This weekly continuation chart of the Bloomberg Commodity Index suggests a break higher out of the saucer bottom that's been years in the making could occur at any time. Geopolitical developments would be the most likely driver. Debt servicing capability would be one beneficiary. (DTN ProphetX chart)
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