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Perspective: Morning Commentary for March 4

By: Arlan Suderman, Chief Commodities Economist

Perspective: Morning Commentary
 
Arlan Suderman
Chief Commodities Economist

March 4 – The world looked on in horror last night as Russian forces opened fire on a Ukrainian nuclear power plant; the Zaporizhzhia power plant is Europe’s largest and it went under siege with military casualties seen and damage sustained, but the reactors are reportedly stable this morning (although under Russian control). Ukrainian officials increased their calls for a ceasefire as their citizens continue to fight back, with world leaders further condemning Putin’s methods and war crimes. Key Ukrainian cities remain under assault from Russian forces, including Mariupol in the southeast and Kharkiv in the northeast, along with the key southern port city of Odessa. Germany has officially registered more than 18,000 refugees from Ukraine in the last eight days, with more than a million citizens reportedly having fled the country so far. Overall, hope for the prospects of a quick end to this conflict seems to be at its lowest level since the start…

 

U.S. employers added a whopping 678,000 jobs in the month of February, well above the average trade estimate for a 423k gain, and 481k in January (itself revised higher from 467k this time around). Traders were pleasantly surprised for the second straight month as coronavirus cases continued to fall and the country went back to work. The U.S. labor market remains resilient with job openings near a record high and layoffs at an all-time low. The unemployment rate ticked lower in February to 3.8%, down from 4.0% in January and below the average trade estimate of 3.9%, and the lowest number since February 2020.

 

Dow Jones futures were indicating a solidly lower open for equities in the midst of the Russia-Ukraine war but losses were trimmed by the strong jobs report. The U.S. dollar is sharply higher once again this morning and WTI crude oil is up another $4+ per barrel at the time of this writing as well. Russia’s second-largest oil company has broken ranks with Putin and is calling for an end to the war – Lukoil produces more than 2% of the world’s crude and employs more than 100,000 people, but is now condemning the president’s actions and asking for ceasefire.

 

The spot (March) Chicago wheat contract is in delivery and thus has the limits off, but the continuous chart below nonetheless reflects the insanity of the cash/FOB global market at this point – technically that marks an all-time high for front-month Chi wheat, exceeding the previous 2008 top. May contracts (KC and MN as well) are limit-up again today. Global importers are looking for wheat this week and not filling their short-term needs, with the absence of Black Sea offers leaving a massive hole in the world balance sheet. Corn prices are not too far behind, given the prospect of its own world S&D issue with Ukraine exports stalled and planting in jeopardy there for 2022. The USDA will have to take those record prices into account in its acreage mix later this month, not to mention expensive fertilizer and potential availability issues there. In the shorter-term, traders are looking for reduced 2021/22 corn, soybean, and wheat carryout numbers in the March S&D report next Wednesday (3/9).

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