Back last Spring, March 22 to be exact, I mentioned that my farmer grandfather carried with him an old Farmers Almanac saying that the first frost would come 6 months after the first Spring thunderstorm. On March 10 we had our first thunderstorm. Well, it was cool on September 10 but not frost cold. Now to be technical, March 10 is not yet considered Spring, actually in Minnesota April 10 might not even be considered Spring. We have come close to our first frost but are still waiting. Because of the drought, any crop that was not irrigated was completely lost here. This is likely the first year where the first frost will only impact the flower gardeners and not the farmers. Lets hope for a better growing season in 2022.
September is winding down. Friday of this week we should be seeing the ISM Manufacturing report. From all interim indicators, manufacturing is still pretty steady. This is in spite of supply chain issues that continue to pile up. Even in Asia, manufacturing continues to grow at an acceptable pace. I would see the ISM report to be within a whisker of the August report.
Supply chain issues are not going away. Last week I shared there were 60 container ships waiting to unload and then be loaded at the Los Angeles port. That was approximately 13 weeks of work. As of Friday that number grew to 70+. There is just not enough capacity at the port to unload the ships piling up. Seattle is in roughly the same position. The US is not the only one in this pickle. Shanghai and Singapore have over 130 container ships anchored waiting for service. At this time 20% of all container ships are anchored some place in the world waiting for access to the port. This is the highest level that has been recorded.
There are multiple issues that the ports are facing. The ports are not fully staffed and are currently not working 24/7 but rather are working only two daily shifts and at times only one shift a day is staffed. The Los Angeles port is currently prepping for the Longshoreman Union contract negotiation. There is a high probability of a strike or slow down in October through November. The container ships built recently hold a massive amount of containers which take much longer to service, both unload and load, which slows everything down.
Once the containers are unloaded, we need truckers or rail lines to move the merchandise along. Truckers nationwide are in an acute shortage for a couple of reasons. First, trucking is not a glamorous job, so candidates are few. Impacting qualification to get a job is a drug test. Many companies are now waiving certain drug tests as long as Federal Regulations are not involved. Sadly we are finding a greater level of our population partaking in drugs which complicate the hiring process. Lastly, the rail lines, especially in the Midwest are focused on carrying oil cars from the shale fields. This puts both grain cars and shipping containers on sidings until there are enough locomotives to move the cars.
Gas and oil prices jumped this week. One Hedge Fund, HITE released a press statement indicating they believe the price jump is nothing more than a dead cat bounce. Granted, HITE is the hedge fund that invests in global green energy and has repeatedly made statements about the demise of the fossil fuel industry. They may be extremely pre-mature in their statement. While the supply numbers for gas and oil seem to have settled this week and the US increased the number of oil rigs again, it appears we have a rough supply and demand balance. This balance is likely rather tentative. Traffic is increasing as workers are returning to the office. Air travel is actually beginning to grow. Virtually every airline is quickly pulling planes out of mothballs in San Bernadino and other storage areas where they were parked in 2020. Demand is increasing not just here but worldwide. With OPEC holding production levels, we could experience higher gas and oil prices just when we are hitting the cold winter weather. Hedge fund analysts are paid to be right, however, the market numbers are not backing them up, at least in the near term.
Have a great week.
