Perspective: Morning Commentary for February 6

By: Arlan Suderman, Chief Commodities Economist

Mon, 06 Feb 2023, 14:39

Perspective: Morning Commentary

Arlan Suderman

Chief Commodities Economist

February 6 – Global stocks came under modest pressure overnight, as traders focused on rising interest rates and rising geopolitical tensions. That pushed the VIX above 19, but such a level still reflects relative calm on Wall Street. However, the dollar index traded at 26-day highs near 103.4 as Treasury yields pushed to 27-day highs following Friday’s monthly jobs report. Yields on 10-year Treasuries are trading near 3.61%, while yields on 2-year Treasuries are trading near 4.41%, which is actually a one-month high. Crude oil prices are trading modestly higher following Friday’s sharp losses, while the grain and oilseed markets were mixed in overnight trade.

Friday’s monthly jobs report from the Department of Labor shocked the marketplace. All the talk on Wall Street has been about recession, and whether we are already in a recession, or perhaps we can have a soft landing. Yet, Friday’s jobs report reflected something one would expect in a robust economy. Wall Street’s initial reaction focused on expectations that the numbers would push the Federal Reserve into being even more hawkish – inflicting even more pain on the economy – to battle wage inflation. The Fed has made it clear that it will not be able to pull overall inflation down to its 2% mandate without bringing wage inflation down, and a tight jobs market doesn’t allow it to bring wage inflation down. Wall Street then pivoted into focusing more on the possibility that the data shows that we can live with high interest rates, giving us a soft landing for the economy. But then reality seemed to set in again ahead of the close and into the weekend on the realization that simply isn’t possible with these jobs numbers. You cannot bring wage inflation down when you have a couple of jobs available for every person looking for a job, leaving employers bidding for the available workers.

Rising geopolitical risks also sobered global traders over the past several days. The U.S. military shot down a large Chinese balloon carrying communication equipment that had traveled from Alaska, down to Montana, and across the States over to the Carolinas. China claims that it was a weather balloon that just “happened to” travel over some of our country’s most sensitive nuclear defense facilities, versing simply following the trade winds. U.S. Secretary of State Anthony Blinken cancelled his scheduled trip to China this week, while China strongly protested action taken by the United States to shoot down the balloon, which was the size of three school busses. The rising tensions come at a time when China is already upset that U.S. House Speaker Kevin McCarthy announced intentions to visit Taiwan. The United States is also considering sanctions on Chinese surveillance companies who allegedly sold equipment to Iran. Remember, geopolitical risks related to the Black Sea region tend to be supportive of commodities, while geopolitical risks tied to China tend to have the opposite impact on commodities.

Seven hundred ships have passed through the grain initiative channel since the plan started on August 1^st, allowing grain to be exported from three different ports in the Odessa area, delivering more than 19.6 million metric tons of grain and food products. The lead destinations of those ships were China, Spain, and Turkey. But the pace of those ships started slowing in November, and it slowed more dramatically as we went through January. Ukraine exported 5.5 mmt of grain and other food products in January, down 1.3 mmt from the previous month. That total included both water and land exports, as Ukraine continues to actively ship products over its border into Europe. Only 3 mmt were shipped via the grain initiative through the three accepted ports, while the remainder of the January shipments went west over land. January corn shipments totaled 2.6 mmt, down 700K mt from December. Wheat shipments in January totaled just 1.3 mmt, down 250K mt from December. The current grain initiative goes to March 19. Officials are already seeking an extension to the agreement, but that will need to include ways to keep Russia from slow-walking inspections. Even so, the greater challenge for Ukraine in 2023 may be in its inability to produce enough grain to export significant quantities. High input crops like corn should see the largest decline in production. Ukraine corn production in the coming growing season could be just a third of what it was in 2021.

Ten percent of Brazil’s soybean crop is harvested, including more than 30% of Mato Grosso’s soybean crop. That has allowed for more than 20% of Mato Grosso’s winter corn crop to get planted already. This means that more than 15 mmt of Brazilian soybeans are already harvested, providing adequate supplies for exporters. We should see a steady stream of boats from Brazil to China from this point as long as weather doesn’t interrupt loadings. The next thing to watch though will be whether continued rains sufficiently slow planting of the corn crop, which needs to get in the ground by the end of the month in Mato Grosso. USDA’s crop report will be out midday on Wednesday.

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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

August 6 – Stocks remain quietly mixed at midday as both the S&P 500 and Dow Jones remain just below their fresh all-time highs put in yesterday. This is allowing the VIX to cool to a four-week low below the 15.4 mark, reflecting the collective sigh of relief in the market amid largely better than expected U.S. economic data today. The dollar remains quietly in the green in its relatively tight range this week, trading at 99.9 at the time of writing. Treasuries remain elevated but have cooled from their recent peaks, with 30-year yields trading at 5.189%, 10-year yields trading at 4.647%, and 2-year yields trading at 4.229% at midday. Crude oil also remains quietly in the green, with nearby WTI up 2.3% on the day trading near $76.80 and nearby Brent up 2.4% on the day trading near $81.40. The ags remain mixed, with the wheat complex now squarely in the red while corn and soybeans cling to small gains, and the livestock complex largely pushes lower.

Mike CastleThu, 06 Aug 2026, 15:18

Grains & Oilseeds

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