$Teucrium Wheat Fund(WEAT)$ $Costco(COST)$ $Invesco DB Agriculture Fund(DBA)$ 🧠🌾🔥 When the Fed Blinks, Food Bites: Why Powell’s Not Driving the Market Anymore 🔥🌾🧠

It’s strange to say this as someone who’s built trading strategy around Fed signals for years, but I no longer believe Powell is in control. The Fed’s dot plot may hint at two rate cuts this year, yet every chart I’m tracking screams that monetary policy has taken a back seat, and food inflation just grabbed the wheel.

At first glance, the June FOMC gave us nothing new. Powell left rates unchanged and the statement read like a script we’ve heard before, “labour strong,” “growth solid,” “inflation elevated.” Markets welcomed the expected two-cut dot plot, and bond yields dipped.

But I wasn’t buying it. Thirty minutes later, neither was the market.

📉 What Powell Giveth, He Taketh Away

That intraday reversal in the 2-year Treasury yield was all I needed to see. The spike down after the FOMC decision was textbook dovish positioning, the rip higher during Powell’s presser confirmed that traders were caught leaning too far. His warning? That tariffs will hit consumers and he’s not cutting until he sees the inflationary fallout in the data.

That one comment pulled yields back to 3.94% and wiped out the earlier rally. I’ve learned to watch the 2-year yield not as a forecast, but as a lie detector. Powell sounded cautious, not confident. Which tells me, he’s likely one of the hawks.

🧭 The Market Sees More Cuts, But Commodities May Kill That View

Futures markets are still pricing more easing than Powell suggested. The end-2025 implied rate sits just below 3.75%, while 2026 is priced closer to 3.10%. That’s a classic market bet on slowing growth.

But I’m focused on something else entirely now, the food complex.

🌽 The Fed’s Real Problem Might Be Wheat, Not Wages

May’s food CPI came in hot at +0.3% month-over-month, the fastest pace since 2021. On its own, that wouldn’t rattle me. But I’ve been watching ag futures light up, soybean oil is spiking, corn just posted its strongest breakout in months, and wheat surged 4.4% in a single session, its biggest gain since July 2023.

This isn’t speculation, it’s risk repricing. Hedge funds are unwinding short bets, and Bridgeton Research sees wheat flipping to net long. Bloomberg’s data confirms that shorts in ag futures are now at 7-week lows.

The Middle East is the powder keg. If the Strait of Hormuz closes, it won’t just disrupt oil, it will choke off fertiliser exports from Iran, Qatar, and Saudi Arabia. That means higher input costs and a delayed inflation wave in food markets. And trust me, if the Fed sees that coming in August CPI, those rate cuts could vanish.

🔍 Here’s How I’m Thinking About It

I’m not trading Powell’s dot plot. I’m watching the spread between front-end yields and the Ag Subindex. I’m looking for evidence that grain inflation makes its way into consumer staples, think $MCD, $KO, $COST, while also monitoring wheat and soybean vol curves. When soft commodities lead CPI, the Fed historically pauses longer.

🧨 A Contrarian Insight: Food May Hit Before Oil

Everyone’s focused on WTI and Brent, but food might be the first mover this time. Oil is buffered by SPR releases and geopolitical hedging. Grain markets? Not so much. They move fast, thin, and emotionally. If weather stays normal but fertiliser gets disrupted, yields drop, prices spike, and shelf inflation returns before energy ever shows up in the CPI.

🧠 What I’m Watching Next

1. July CPI food basket breakout

2. Hormuz shipping updates via marine traffic

3. Institutional positioning in ag ETFs like $DBA and $WEAT

4. Powell’s Jackson Hole language, any reference to “commodity-driven inflation” is a tell

🎯 Conclusion: Powell May Be Calm, But I’m Not

Let’s be clear. Powell didn’t change much with this FOMC, but the world might. The market still wants to believe in a smooth disinflation story, but I’ve seen this movie before. When food moves, the Fed doesn’t get to wait. If CPI turns on groceries, that “two cuts” consensus will evaporate faster than this week’s bond rally.

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