Perspective: Mid-Day Commentary for December 21

By: Arlan Suderman, Chief Commodities Economist

Thu, 21 Dec 2023, 17:09

Perspective: Mid-Day Commentary

Arlan Suderman

Chief Commodities Economist

December 21 - Stocks traded modestly higher today, following Wednesday's big break, but the trade has a cautious tone to it ahead of the holiday break, with the index of leading economic indicators continuing to forecast a recession in data released this morning, as it been signaling for some time. The markets will be closed Monday for Christmas, before reopening for a thinly traded shortened week ahead of the three-day New Year holiday weekend. Many traders will be absent next week, and market-moving headlines are expected to be slow. As such, I too will be taking a break from my daily commentary next week, although I'll be following market developments, and returning with commentary if warranted. For today, the VIX has firmed a bit to trade at one-month highs above 14 as we approach the end of the year at a time when geopolitical risks remain high in the Middle East. The dollar index is trading just above five-month lows near 101.9 as Treasury yields continue to trend lower. Yields on 10-year Treasuries are trading near 3.88%, while yields on 2-year Treasuries are trading near 4.34%. Crude oil prices are trading modestly lower, while the grain and oilseed markets are mixed.

The soybean complex broke lower in this morning's trade as thunderstorms develop in Center-West Brazil. Early soybeans won't benefit much, but mid- and late-planted soybeans could benefit a great deal from the rains, where they fall. Commodity Weather Group remains skeptical that everyone will see the rains, although the models are more encouraging than they've been for a long time. Chicago soybean futures are focused on the impact that those rains will or will not have on U.S. ending stocks. A short Brazilian crop "could" reduce production sufficiently to increase U.S. export demand, necessitating higher prices to ration demand due to this year's tight stock levels. But what does that look like. This morning I wrote that we could see Argentina, Paraguay and Uruguay increase exports by up to 12 million metric tons this year. I've since seen some estimates that suggest that number "could" go as high as a 20 mmt above the previous year. That would offset a lot of lost export potential from Brazil. Part of the equation focuses on how China responds to potential evidence of larger Brazil production losses. Does it panic and start hoarding supplies, increasing purchases from the United States, or does it sit back and let it play out? That will play a big role in determining when / if Chicago soybean futures have another rally in them. Otherwise, I still do not see evidence of Brazil losses that are great enough to result in tight supplies yet.

China's spot corn prices continue to break lower as demand slows amid a growing supply. Local sources suggest that this year's crop may have been closer to 300 mmt, and China just posted record imports in November. Offers from industrial processors to buy corn fell by more than 70 cents per bushel over the past month, dropping prices close to production costs, but the market still lacks firm footing. Farmers keep hoping that the national corn reserves will accelerate buying, supporting prices, but that has not yet happened. Brazil exported 275 million bushels in November, with another 285 million expected to be shipped this month, and much of that going to China with arrival early next year. It will take months for China to utilize all the stocks building up at its southern ports at this pace.

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Perspective: Morning Commentary for August 7

August 7 – The U.S. economy unexpectedly lost 23k jobs in July, dramatically below market expectations of an 80k increase and marking the worst Non-Farm Payrolls print since February. Furthermore, May and June were both revised sharply downward, with combined revisions showing 103k fewer jobs than previously reported. Outside of the healthcare sector, which added 22k jobs in July, the losses were very broad-based. Government payrolls saw the largest decline, shedding 53k jobs in July, the largest seen since October 2025, while June was revised down to show a loss of 10k jobs as well. The private sector at least saw growth, adding 30k jobs in July, now matching the month prior after it was revised down from the 49k initially reported, and substantially missing forecasts of 78k jobs being added. This is a sharp reversal in course from the largely better than expected U.S. labor data seen earlier this week.

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Perspective: Mid-Day Commentary for August 6

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Perspective: Morning Commentary for August 6

August 6 – This morning’s stronger-than-expected U.S. labor data offered markets some relief, reinforcing confidence in the economy while giving the Fed greater flexibility to raise rates should inflationary pressures reaccelerate in next week’s July data. Stock futures are pointing to a mixed open to start the day, with the tech-heavy Nasdaq showing the most weakness. The VIX has fallen notably from yesterday’s spike above 18.4 as it starts the day hovering just below the 16-mark. The dollar is quietly higher as it trades just above 99.8, holding in the tight range seen thus far this week as traders continue to digest data to shape expectations for the Fed’s next move, which we’ll dive into in more depth below. Long-term treasury yields have relaxed slightly from their recent spike, with 30-year yields starting the day trading just above 5.19%, while 10-year yields trade above 4.64%, and 2-year yields sit below 4.22%. Crude oil is modestly higher to start the session after sharp declines earlier in the week, with nearby WTI up 1.8% to trade at $76.40 and nearby Brent up 2.4% to trade at $81.40. Meanwhile, the ags are quietly mixed to start the day.

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