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Perspective: Morning Commentary for March 29

By: Arlan Suderman, Chief Commodities Economist

Perspective: Morning Commentary
 
Arlan Suderman
Chief Commodities Economist

March 29 – Russia’s Defense Ministry said they would “drastically reduce military activity” on two major fronts, one of those being the Ukrainian capital of Kyiv, following talks between the two sides in Istanbul today. Ukraine claimed its “enemy did not meet the goal of its offensive operation”, citing a Russian struggle to reinforce positions and move around soldiers, though they still warned of high risk to military and civilian infrastructure in those two cities. The two sides still have no official ceasefire agreement and talks will remain ongoing, while Ukrainian citizens continue to evacuate in massive numbers.

 

Dow Jones futures continue to show an optimistic tone over any type of resolution to the war, and WTI crude oil retreating sharply to the south side of the $100/barrel mark. Treasury yields ticked higher today to their highest levels since May 2019. Traders are looking for a return to any type of normalcy, and that includes interest rates rising in 2022 to cut off inflation. Speaking of inflated prices, the FHFA’s U.S. House Price Index rose 1.6% in January, above trade expectations for a 1.2% increase and up from +1.3% in December. Home prices have steadily climbed by around 1% or more since the summer of 2020. The S&P’s 20-City Composite Home Price Index has values up just shy of 20% year-over-year; that’s only slightly off their July peak with demand still hot post-pandemic.

 

WTI crude oil has led a sharp commodity-wide plunge during the morning hours, with wheat not far behind as the trade gains optimism over a war resolution. That’s all despite a U.S. dollar collapse this morning as well. Risk premium is being taken off the market on all fronts. Crude oil, products, and natural gas trade flows are settling in after a massive wartime shift, with U.S. exports rising to 3.8 million barrels per day last week, their highest since July 2021. Worldwide oil demand has rebounded back to near pre-pandemic levels.

 

The USDA will officially release national winter wheat ratings next Monday but state condition numbers continued yesterday afternoon, with the major production state of Kansas registering a seven-point increase this week to 32% good/excellent. That did outweigh week-over-week declines for other states including OK, CO, MT, and NE. This is the time of year where producers and agronomists see the wheat crop emerging and wonder if the winter damage sustained was as bad as originally thought…but it will be tough to know for sure until the crop is harvested. Regardless, we’re at an optimistic point of the year where the government is expected to release strong planting intentions numbers on Thursday along with estimating plentiful grain stocks halfway through the year. Attention will turn to weather after that, with April bringing initial corn planting dates across the Midwest. Commodity Weather Group’s 15-day maps are shown below with precipitation chances throughout the near-term, but nothing substantial, as most U.S. crop areas remain drier than normal. Temps are on the cold side but recovering a bit into mid-April.

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