Perspective: Mid-Day Commentary for June 5

By: Arlan Suderman, Chief Commodities Economist

Mon, 05 Jun 2023, 16:51

Perspective: Midday Commentary

Arlan Suderman

Chief Commodities Economist

June 5 - The major stock indices remained mixed at midday, with the tech sector leading the way for those stocks posting gains after Apple touched record highs this morning. Traders are encouraged by expectations that the Federal Reserve will raise its benchmark rate just one more time before pivoting (we've been here before). The VIX is trading below 15 at midday, while the dollar index is trading near 104.0, following Treasury yields lower after the release of this morning's factory order data. Yields on 10-year Treasuries are trading near 3.70%, while yields on 2-year Treasuries are trading near 4.50%. Crude oil prices are trading more than 1% higher on the day, but that's near the session low after prices spiked five-week highs on the OPEC+ weekend decision to cut production. The grain and oilseed markets are mixed.

Brazilian farmers have only sold 32% of this year's record large safrinha corn crop, for which harvest has begun, up just 2 points on the week, but nearly 20 points below typical levels for this time of year. This combines with a U.S. farmer who wishes he had been more aggressive selling earlier as well, to cap rallies when they occur. July corn touched $6.14 this morning, up from the May 18 low of $5.47, triggering another round of sales that quickly erased overnight gains. Soybeans found selling on this morning's strength as well for similar reasons. However, wheat prices traded firmer for much of the morning as the short-covering rally continues in that market amid weather concerns and amid concerns that Ukraine exports might be squeezed shut in the weeks and months ahead. Live cattle future pushed higher following last week's $7 - $10 surge in cash prices.

The PMI composite final index came in at 54.3, down slightly from analyst expectations of 54.5. The Services index came in at 54.9, down from expectations of 55.1. A number above 50 indicates month-on-month growth. The ISM Services index came in at 50.3 for May, showing very small incremental growth during the month. That's down from analyst expectations of 52.0. Factory orders grew 0.4% month-on-month in April, which was half the expected 0.8% growth rate. Furthermore, the previous month's growth was revised to 0.6%, down from the 0.9% growth originally reported last month.

USDA inspected 46.5 million bushels of corn for export in the week ending June 1, as shown below, along with 10.7 million bushels of wheat, 7.9 million bushels of soybeans and 2 million bushels of grain sorghum. Of the above, that portion that was inspected for shipment to China included 15.8 million bushels of corn, 2 million bushels of grain sorghum, 0.3 million bushels of soybeans and no wheat. Marketing year to date corn export inspections to all destinations fall short of the seasonal pace needed to hit USDA's target by 80 million bushels, versus being short by 92 million bushels the previous week. I look for this deficit to continue to shrink for a few more weeks until a larger supply of cheaper Brazilian corn hits the market. Marketing year to date soybean export inspections exceed the seasonal pace needed to hit USDA's target by 42 million bushels, down another 5 million from the previous week. Soybean shipments will likely continue to struggle through the end of the marketing year, likely erasing this surplus and start to build a small deficit resulting in a modest reduction in the export target.

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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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