Perspective: Morning Commentary for November 22

By: Arlan Suderman, Chief Commodities Economist

Mon, 22 Nov 2021, 14:38

Perspective: Morning Commentary

Arlan Suderman

Chief Commodities Economist

November 22 – Stocks start this holiday-shortened week with a positive tone to them, with the Nasdaq and S&P 500 stock indices near record territory. President Biden is making some significant policy announcements this week, with implications for the economy. Gains are limited by rising Covid numbers in key economic areas of the world, which are resulting in more restrictions and lockdowns. The VIX is trading near 18 this morning, after gradually trending higher over the past month. The dollar index is trading at new 20-month highs near 96.4 after Biden’s Fed Chair nomination. Yields on 10-year Treasuries are trading near 1.60%. Crude oil prices are posting modest gains at this hour, after sinking to fresh seven-week lows below $75 per barrel earlier in the session. The Ags traded mostly higher overnight, led by strong gains in the wheat market.

President Biden is using this week to speak to several issues ahead of Thursday’s Thanksgiving holiday break, with possible significant implications for the economy. Analysts are speculating that the president will announce a plan to release oil from the Strategic Petroleum Reserve to fight high energy prices as part of his plan to combat inflation. Crude oil prices are already $10 off their highs posted four weeks ago, as global Covid restrictions increase, but Biden is feeling the pressure to do something to address inflation at the gas pump.

The president also nominated Jerome Powell for another term as Chair at the Federal Reserve. Wall Street seemed confident that President Biden would stick with the status quo, and that he would nominate Jerome Powell for another four-year term in the position, but some analysts thought that Powell might become a scapegoat for current inflation problems, leading to the nomination of Fed Governor Lael Brainard. Instead, Brainard was appointed Vice-Chair of the Fed. Brainard is seen as more progressive and more dovish than Powell, which would be expected to feed more money into the markets, but that would also add to current inflation fears. The appointment of Brainard as Vice-Chair appears to be meant to give Brainard more influence on the direction of the Fed, and to perhaps better position her for the Chair position at some point.

Strong third quarter earnings reports showed that inflation has not yet had a notable detrimental impact on corporate profits, with consumers still flush enough with cash to pay the higher prices. Every product has its price that will shut off demand, but that price level is higher when the consumer has ample amounts of cash. For example, you would be less concerned about inflation if I just handed you a check for $10 million dollars. You would have a sense that it mattered less, and you would continue to spend despite the higher prices – likely even increasing your spending. That’s the same principle that applies when fiscal and monetary stimulus increases the money supply available to consumers. The good news is that the increased money supply helps the consumer adjust to inflation. The bad news is that it artificially elevates demand, ramping up inflation to even higher levels that risk it getting out of control. That then would necessitate even more drastic – and painful – measures to be taken by the Fed to bring things back under control, as was the case with Paul Volker four decades ago.

China reported just seven new Covid cases yesterday – five in Dalian and two in Yunnan. Yet, travel in China continues to suffer. The latest data shows that October air travel for domestic trips was down 24.7% year-on-year. That’s not likely to improve any time soon. China is committed to its zero-tolerance policy regarding Covid-19. New cases mean more limits on travel and quarantine requirements for those who may have been exposed. Those people exposed are determined via electronic tracing. Traveling isn’t worth the risk for a lot of people, which is reshaping domestic demand and consumption patterns.

China imported 0.775 million metric tons of U.S. soybeans in October, or 28.5 million bushels. That’s down from 3.4 mmt, or 124.9 million bushels, the previous year. Much of the decline was due to Hurricane Ida shutting down the ports of New Orleans in late August, slowing soybean shipments over the coming month. The November data should show improvement in the import pace, but shipments have not yet risen sufficiently to offset the gap created by the September slowdown. Chinese buyers now see a cheaper, large Brazilian crop developing, with the earliest soybeans being harvested late next month into January. It’s going to be important to see strong soybean shipments in December, or we can expect to see USDA lowering its export target once again by January. Meanwhile, tight wheat supplies continue to find buyers on breaks, with corn defending its acreage amid high input costs.

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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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