Perspective: Morning Commentary for July 12

By: Arlan Suderman, Chief Commodities Economist

Tue, 12 Jul 2022, 13:20

Perspective: Morning Commentary

Arlan Suderman

Chief Commodities Economist

July 12 – Recession worries continue to haunt Wall Street, despite how much of that has already been priced into the market. Stocks are again under pressure this morning, with the VIX firming to trade near 27. The dollar index hit a fresh 19-year high near 108.6 early this morning, with yields on 10-year Treasuries slipping to trade near 2.92%, as money flows to the safe-haven assets. Key inflation data is scheduled to be released on each of the next two mornings, with retail sales data on Friday to close the week. This will help set the stage for the next Federal Reserve policy meeting at the end of the month. Commodities joined stocks on the defensive this morning as both the dollar and the VIX push higher. Crude oil prices are down by more than 4% this morning, while the Ags are generally down 1 – 2%. However, the grain and oilseed markets are also focused on today’s monthly USDA WASDE crop report, scheduled for release at Noon Eastern Daylight Time.

The National Federation of Independent Businesses reports that its small business optimism index fell 3.6 points in June to 89.5, down from 93.1 in May and below analyst expectations of 92.9. It was the sixth month in a row that the index came in below the 48-year average of 98. Small business owners expecting better business conditions over the next six months fell to a net negative 61%, which is its lowest level for the 48-year history of the survey. Those expectations have deteriorated each month this year through the first half of the calendar year. Inflation tops the list of concerns for small businesses, with 34% of small business owners naming it their top single most important problem, up 6 points on the month and its highest level since late 1980 during the Paul Volker era at the Federal Reserve. Volker addressed inflation at that point by driving interest rates upward toward 20% briefly. Other concerns noted in the survey included worker shortages, a discouraging outlook for economic policy, taxes, and regulations. Fifty percent of small business owners reported job openings they were unable to fill.

Today’s edition of China Direct, published by our Shanghai office, notes that another 69 new domestically transmitted Covid-19 cases were identified on Monday, which is up 13 from the previous day. Another 278 asymptomatic cases were identified as well on Monday. More locations in China are now focusing on every single infection to get this latest outbreak under control. For example, Zhumadian, in Henan province, announced a three-day emergency control for the entire city of seven million people from Tuesday to Thursday due to two infections detected in the downtown district. Elsewhere, repeated rounds of testing are required, with lockdowns of communities, buildings, and districts in quarantine zones for anywhere from two to 14 days. Covid variant BA.5 has been the virus of concern recently, but now a sub-variant BA2.75 threatens to be even more contagious than any seen to this point. All of this has a detrimental impact on the economy.

China’s soybean purchases remain relatively slow, with five cargoes purchased over the past week for shipment in August from Brazil and Argentina, and three new-crop shipments in February, March, and April from Brazil as well. Better-than-expected yields in Brazil’s late harvest made more soybeans available than expected this summer. China also continues to supplement current needs with releases from its reserve during this time of high prices. Those reserve supplies will need to be replenished at some point, but China hopes that prices fall before it has to do so. It has an estimated 80% of its needs covered for August now, but it remains largely uncovered for September and October. Chinese buyers are closely watching U.S. Midwest weather, which continues to trend adverse.

This is not a dome of doom for the Midwest. You may call it that for the Plains, but there is still some debate over the extent that the hot dry weather will extend east into the Midwest in the coming weeks. Temperatures are currently mild for much of the Midwest, but that is expected to change by late week. Half of the Midwest currently faces longer-term moisture deficits. Periodic events of thunderstorm clusters are expected to ride around the high-pressure ridge in the days and weeks ahead. As such, some fields will see heavy rains, and perhaps high winds, while a few miles away they will be left high and dry. Temperatures will be on the rise at what is normally the hottest time of year. Western areas of the belt are expected to see daytime highs 8 – 12 degrees above normal. Nighttime temperatures are expected to be high as well, which creates challenges for corn in particular. We cannot yet say that this will be a significant problem for this year’s corn and soybean crops, but it is enough of a threat to make end users quite nervous in a year when stocks are tight. Soybean traders are much more concerned following USDA’s reduction of acreage on June 30. For today though, it’s about Wall Street fear and USDA’s crop report.

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Perspective: Morning Commentary for August 7

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Mike CastleFri, 07 Aug 2026, 13:26

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Mike CastleThu, 06 Aug 2026, 13:24

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Matt ZellerWed, 05 Aug 2026, 12:39

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