Perspective: Morning Commentary for August 19

By: Arlan Suderman, Chief Commodities Economist

Fri, 19 Aug 2022, 13:42

Perspective: Morning Commentary

Arlan Suderman

Chief Commodities Economist

August 19 – Stock futures are under pressure this morning as traders take profits off the table ahead of the weekend following this week’s run of the major indices to their highest level since late April. The VIX is largely trading between 20 and 21 this morning, reflecting modestly higher nerves ahead of the weekend. The dollar index rallied above 108 to its highest level in 25 days as Treasury yields continue to rise on hawkish Fed expectations. Yields on 10-year Treasuries are trading at four-week highs near 2.98%, while yields on 2-year Treasuries are trading near 3.29%, as that spread narrows. The broader commodity sector lacked clear direction this morning, with crude oil prices generally 1% lower, and the grain and oilseed sector mixed overnight.

Wall Street concerns about a hawkish Federal Reserve are escalating once again amid signs that the Fed may actually do what it said it would do. Fed fund futures have repeatedly cast doubts on Fed communications about the scope of their hawkish leanings. Yet, the Fed has repeatedly leaned more hawkish than market expectations over the past several meetings, with signs suggesting that the trend will continue into the next meeting as well. The Fed’s current short-term target rate is 2.25 – 2.50%. This morning’s Fed fund futures trading pegs the odds at 54% that we will see another 50 basis points added to that rate in September 21, but the odds of a 75-basis-point rate hike are up to 46%. Fed fund futures trading currently suggests that the market expects the central bank to add 125 basis points to the benchmark rate by the December meeting, taking the target range to 3.50 to 3.75%. Ironically, that’s the same level that the market expects the rate to be at a year from now as well, even though that is still well below the rate of inflation. The Fed’s dot plot graphic on which each policymaker plots where they expect the benchmark rate to be at the end of each year suggest that they expect to add another 75 basis points next year. Even that would still be below the current rate of inflation.

The market expects the rate of inflation to come down to 3.5% by next summer, possibly providing us with our first positive real interest rates in some time. The Fed seems to think that inflation will come down to at least the 4.25% level. That’s a risky assumption to make, although it could happen if a larger recession hits the economy. There’s still an unprecedented amount of stimulus in the economy. Many of the structural issues in the economy that created the inflationary pressures are still present, with Washington currently still adding to them. The “canary in the coal mine” that I am watching is natural gas prices in Europe, that will impact a plethora of factors that influence global inflation pressure over the coming year – particularly focused on the winter months ahead. Inflation happens when demand exceeds supply. The data clearly shows that overall demand for goods is elevated above normal levels due to the tremendous amount of stimulus in the system. Meanwhile, supplies are limited below normal levels for various reasons. Little has been done to provide long-term fixes to either side of that equation to this point. The Fed is doing what it can, but there is so much that is out of its control.

Farmers started planting the 2023 winter crops in Ukraine’s southern Odesa oblast this week. Ukraine officials warn that the challenges will be greater for the approaching marketing year than they have been for the current one. Financing the next crop will be more difficult, particularly with exports still very limited. Crop input supplies, such as fuel, fertilizer, chemicals, equipment parts, etc., will be more challenging to acquire as well. As such, Ukrainian officials, who are known for their optimism, indicate that acreage for the 2023 crop may drop by 30 to 60% this fall. We’re seeing indications that Russian farmers, disappointed with low prices and export restrictions, may plant fewer acres as well. In other words, the world’s breadbasket may get smaller in the year ahead. Ukraine exported just under 3 million metric tons of grains and pulses in the 2022-23 marketing year that started July 1, which is less than half the pace over the same period a year ago, and a fourth of its pre-war capacity. More than two-dozen ships have left Ukraine since the safe-corridor agreement went into effect, but most of them were small ships.

Next week will be significant for the corn and soybean markets. The Pro Farmer Midwest Crop Tour will spread out across the Midwest sampling fields to count soybean pods and to estimate corn yields. For consistency purposes, tour participants will assume normal seed size when calculating yields, but that could end up being one of the larger variables this year. It’s difficult to detect a 5% smaller seed size, for example, but that would cut yields by a similar amount. A large portion of the Midwest faces moisture and temperature risks that would normally be expected to shrink seed size, but we may not learn how that plays out in reality until the combines roll next month.

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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.

Mike CastleThu, 06 Aug 2026, 13:24

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Perspective: Morning Commentary for August 5

August 5 – U.S. equities markets are on fire this week, with both the Dow Jones and S&P 500 setting new all-time highs yesterday with futures indicating further gains again today; the marketplace remains optimistic over a deal with Iran despite no evidence of such as of yet. Crude oil is working on a lower high and low today but remains slightly on the high side on the session, while the dollar is retreating back towards Monday’s nearly two-month low. The ten-year note is steady-to-lower this morning (though solidly lower so far this month) at 4.605%, while the VIX index continues to rebound into mid-week at almost a 17-point reading this morning.

Matt ZellerWed, 05 Aug 2026, 12:39

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Perspective: Mid-Day Commentary for August 4

August 4 – The Dow Jones is absolutely piling on gains today, adding a similar number that led to yesterday’s record, with the benchmark index now nearing the 54k-point mark through mid-morning. The S&P also hit a new record, while the NASDAQ is exceeding both those gains on a percentage basis. The marketplace is optimistic on a U.S.-Iran trade deal, though the proposed resolution is still being “circulated between the parties”.

Mike CastleTue, 04 Aug 2026, 14:58

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