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Perspective: Morning Commentary for August 25

By: Arlan Suderman, Chief Commodities Economist

Perspective: Morning Commentary
 
Matt Zeller
Senior Market Analyst

August 25 – U.S. weekly unemployment claims came in at just 243,000 for the week ending August 20, down from 250k the week prior and the average analyst estimate of 252k; continuing claims for the week ending 8/13 also came in below expectations at 1.415 million, versus 1,434 mln in the week prior and the average 1.441 mln estimate. It’s a good sign that U.S. employers are holding on to workers amid economic uncertainty and rising inflation/interest rates. Second-quarter U.S. GDP also came in above trade estimates, though still at a -0.6% year-over-year, compared to the -0.7% guess and -0.9% in Q1. U.S. equities are edging higher again this morning after a small gain for the Dow Jones yesterday reversed a three-session losing trend; the ballyhooed Jackson Hole symposium begins today and the trade will be watching and listening closely for any clues on how the Fed will handle rising inflation going forward.

 

CF Industries announced they would temporarily halt ammonia production at its remaining United Kingdom plant due to high natural gas prices; they had already closed the smaller of their two U.K. facilities. This will affect carbon dioxide supplies to the food industry (the two plants account for 60% of the nation’s CO2 production), but is indicative of a larger problem for global fertilizer supplies. U.S. nat gas prices remain within shouting distance of the $10/mmbtu mark, but European values have spiked to many times that equivalent on Russian pipeline concerns.

 

Day three of the Pro Farmer 2022 crop tour brought more varied results from the eastern and western legs of the tour. Scouts in dry areas of Western Iowa found corn yields below last year and average across the board, with strong anecdotal pictures from Illinois scouts on the eastern leg but state yields still not coming close to matching last year. Some of the pictures didn’t seem to match calculated yields, nor match actual reports from residents on actual potential this year. We shall see what comes from the rest of the tour in Iowa and Minnesota; yield potential should be strong for both, but that overall PF national estimate tends to come in just a bit shy of the USDA August figure and please their farmer client base (though it did not last year, and they nailed final yields…)

 

Brazilian government supply agency Conab put up some aggressive production estimates for the new 2022/23 crop season, including a 3.5% increase in soybean plantings coupling with increased yields to result in a massive 150+ million tonne crop, and total crop production (including minor crops not listed below) of a record 308 MMT. While U.S. crop acreage ever-so-slowly declines, Brazil’s continues to increase year-over-year, thanks mostly to a switch from pastureland; total production more than doubled in the last six years up to 2021/22.

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