Perspective: Morning Commentary for December 31

By: Arlan Suderman, Chief Commodities Economist

Fri, 31 Dec 2021, 14:22

Perspective: Morning Commentary

Arlan Suderman

Chief Commodities Economist

December 31 – It’s the final day of 2021, and I’m wondering what I’m doing at the office. Oh yeah, the markets are open one last time. Expect a lot of people to be out today, so anything is possible in these markets. Take any technical move with a grain of salt until it can be tested on Monday. College football games will likely get more attention than the markets for many people today. Market action may be choppy and erratic at times. Stocks have a bit of a weaker tone to them this morning, albeit just below record highs, thanks to a strong Santa Claus rally this year in the face of the biggest Covid outbreak to date. Fortunately, the now-dominant Omicron variant of Covid appears less lethal, and therefore it is creating less fear for both human life and for the economy. As such, the VIX continues to trade in the 17 range this morning, which is near its six-week lows set this week. The dollar index is trading near 95.8, with a bit of a weaker bias. Yields on 10-year Treasuries are trading near 1.50% this morning, while crude oil prices are down nearly 1% back near $76 per barrel as traders eye continued airline cancellations. The Ags were mixed overnight, lacking any clear direction following recent weakness.

Flight cancellations continue to be a major problem for holiday travelers trying to return home. FlightAware reports 1,210 cancellations within the United States already this morning, with another 781 delays. Most of the blame continues to land at the feet of the Omicron variant of Covid-19, as crews call in sick. However, a developing winter storm in the southern Rockies is expected to further complicate travel as we move through the weekend as it moves to the north and east across the country, bringing severe weather to its south and east and ice, bitter cold and heavy snow behind it to the north and to the west of the storm system. This is not going to be a fun travel weekend for many holiday and football bowl travelers.

The Centers for Disease Control reported 486,428 positive Covid-19 tests on Wednesday, the latest date for which data was available this morning. That’s nearly 200K above the highs set nearly one year ago, and it doesn’t even count the at-home tests that do not get reported. The seven-day moving average continues to rise sharply, pushing to a new record high 316,277 on Wednesday, up from 281,851 the previous day, and up from 121,667 two weeks ago. The sharp rise is largely due to two factors. First, the Omicron variant is speeding through the population at record speed. Holiday gatherings are just helping it spread that much faster. Second, a lot of people are getting tested ahead of traveling, being with family, holiday parties, etc. So, both the incidence and the testing rates are higher. Fortunately, we are still not seeing a spike in the daily death count, and at this time, none is expected. I say that with growing confidence, because the recently updated Covid hospitalization data shows no spike in hospital stays on a national level due to Covid as well. Could this be what we’ve been waiting for – the natural progression of a virus that finally removes the fear factors as it drifts more to the appearance of a common cold? Let’s hope so. We can say that 2020 was the year that Covid spread fear around the world, while 2021 was the year that Covid started to mature as a virus, and we learned to live with it.

I’m not much of a person to look backward, by nature. My personality is one that likes to keep looking forward. But the last day of the calendar year creates an expectation to look backward, so there is some benefit to it. History provides lessons for us. We’re bound to repeat the mistakes of the past if we fail to learn from them. This past year was the year that we learned to live with Covid. It’s also the year that we – hopefully – learned that actions have consequences, even if unintentional. You can’t pump trillions of dollars into an economy that is partially shutdown without creating hyper-elevated consumer demand, resulting in supply chain disruptions, labor shortages, and inflation. The Fed gets the “opportunity” to try to fix the problems that it helped to create in the year ahead. The mid-term elections will complicate that effort. Record high fertilizer prices were also a product of the past year, but the most significant implications probably will not be felt until next year. This past year was also the year of increasing geopolitical risks, which have implications for the commodities in the year ahead. I’ll add more on that on Monday. And yes, this is all related to the economics of supply and demand as managed by the markets.

As for today, showers have increased in dry areas of southern Brazil, Paraguay, and Argentina. It does not appear to be a break in the pattern at this point, but the showers – which have been good at times – were timely. Our Brazil team will release its updated production estimates on Monday. Soybean harvest began in Mato Grosso midweek. A major winter storm develops in the Plains this weekend, slowing grain movement, while providing some moisture.

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Matt ZellerWed, 05 Aug 2026, 12:39

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Mike CastleTue, 04 Aug 2026, 14:58

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