Perspective: Mid-Day Commentary for April 3

By: Arlan Suderman, Chief Commodities Economist

Mon, 03 Apr 2023, 17:07

Perspective: Midday Commentary

Arlan Suderman

Chief Commodities Economist

April 3 - Talk of $100 crude oil possibilities following today's OPEC+ output cut dominated Wall Street today, with traders worried that it will bring a return of sticky inflation pressures and higher Treasury yields as the Federal Reserve responds to the new pressures. The Dow pushed higher and the Nasdaq came under pressure, while the VIX continued to trade near 19, suggesting no sense of panic on Wall Street. The dollar index is trading near 102.2 at midday, while Treasury yields have pulled back as money comes out of the safe-haven asset class. Yields on 10-year Treasuries are near 3.43%, while yields on 2-year Treasuries are trading near 4.01%. Crude oil prices are 6% higher at midday, while grain and oilseed prices are mostly higher as well. Grain and oilseed prices found support Friday from supportive USDA stocks and acreage reports, while today's OPEC+ decision added momentum to the upside. Yet, prices are well off their session highs in the sector due to fund profit taking following recent sharp gains. After all, the banking contagion risks continue quietly in the background, making fund managers a bit quicker to take profits following significant moves. Look for spring planting weather to slowly increase in importance to traders, especially after Friday's reports narrowed the margin for error. I still expect stocks to grow over the coming year, but the margin for error is smaller today than it was a few weeks back.

USDA inspected 43.2 million bushels of corn for export shipment in the week ending March 30, as shown in the graphic below, along with 18.3 million bushels of soybeans, 6.2 million bushels of wheat and 0.4 million bushels of grain sorghum. Of those totals, the portion that was destined for China included 10.9 million bushels of soybeans, and virtually no corn, wheat or grain sorghum. Today's data brings marketing year to date corn inspections to 762.5 million bushels, down nearly 37% from the previous year's pace, and down nearly 170 million bushels from the seasonal pace needed to hit USDA's target. I still believe that we will close that gap in the last half of the marketing year, and perhaps even top USDA's target modestly, but much of that hinges on my expectation that China will focus on rebuilding its reserves this year. Marketing year to date soybean export inspections total 1.670 billion bushels, up nearly 3% from the previous year's pace and more than 50 million bushels above the seasonal pace needed to hit USDA's target. I do believe that we will see that current surplus pace slow relative to the seasonal pace in the last half of the year, particularly if Brazil's crop is as big as our customers tell us that it is.

StoneX Brazil pegs this year's soybean crop at 157.68 million metric tons, up from 154.66 mmt the previous month and up by more than 28 mmt from the previous year's crop. Compare that to the 30 mmt of soybeans that the United States shipped to China last year, and you start to get a grasp on the scope of this year's production increase in Brazil. Much of that will of course be offset by the potential for Argentina's crop to fall by nearly 20 mmt below last year's crop, favoring a southerly flow of soybeans from Brazil to Argentine crushing facilities in the months ahead. StoneX Brazil pegged total corn production at 131.34 mmt, up from 130.61 mmt the previous month. USDA currently puts Brazil soybean production at 153 mmt and corn production at 125 mmt. USDA will update its production estimates next week on Tuesday when it releases its next WASDE crop report.

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Perspective: Morning Commentary for August 7

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Grains & Oilseeds
Energy
Dairy
Renewable Fuels
Cocoa
Coffee
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