November 24 – Stock futures had a mixed tone overnight, with traders cautious as Treasury yields rose and as traders assess Black Friday consumer buying in the States, while monitoring the cease fire in the Gaza Strip. The VIX is trading near 13 this morning, reflecting relative calm on Wall Street, in what is expected to be a relatively thinly traded shortened trading session. The dollar index is trading near 103.5 in early trading. Yields on 10-year Treasuries are trading near 4.47%, while yields on 2-year Treasuries are trading near 4.94%. Crude oil prices are again 1% lower on the delay in the scheduled OPEC meeting that may mean that it’s ability to control production is weakening, while the grain and oilseed markets are mostly lower in early trade.
It's Black Friday in the United States, which is one of the busiest shopping days of the year for consumers. Businesses count on Black Friday sales to create their profits for the year. Sales on this date are also seen as an indication of what we can expect in consumer buying through the remainder of the holiday shopping period leading up to the Christmas holiday next month – a measuring stick of the health of the U.S. economy. Strong sales would suggest a continued resilient economy, while poor sales would raise fears that we are slipping into a recession. Members of the Federal Open Market Committee of the Federal Reserve will certainly be monitoring the data coming out of today’s consumer buying, while also taking note of Wednesday’s consumer sentiment survey data that showed that consumers expect a resurgence of inflation in the month’s ahead. Declining consumer sentiment amid expectations of a resurgence of inflation would be expected to result in slower holiday sales – doing the work of the Fed for it – but we’ll need to see if the data backs that up in the days ahead.
Crude oil prices plummeted at times in recent days on reports that OPEC was delaying its previously scheduled Sunday meeting. Rumors circulated that Saudi Arabia was upset at various members of the cartel regarding their output numbers, raising risks that the cartel’s ability to control output may be unraveling. The current delay is said to be tied to Angola and Nigeria wanting higher production baselines from which their quotas would be calculated, which is the general theme for some other countries as well. Many of these OPEC members have economies that are largely funded through oil revenues, including key member Saudi Arabia, which is bearing the heaviest load of production cuts currently. Their economies are hurting. Reduced output is not giving them stable revenues because the sluggish world economy is hurting demand. As such, various members are seeking to increase their quotas, while battling the temptation to cheat the system to increase their revenues. That risks increasing supplies offered on the world market, driving prices even lower, putting the market in a downward spiral.
Scattered showers narrowed the areas of immediate crop stress in Brazil’s soybean belt to roughly 20% of its soybean belt, although that 20% includes some highly productive areas of Center-West Brazil. The key word in the above statement is “scattered,” with some areas seeing good moisture and others left high and dry. The next seven days see the chances for those showers dry up, allowing the areas under stress to expand to 40% once again, while southern production areas remain under a pattern of excessive rains. Chances for drought relief improve once again for Center-West Brazil for week #2, but confidence in forecasts that far out are lacking, because previous rains in the extended forecast have frequently failed to verify during the current growing season. StoneX Brazil expects to release the results of its updated customer survey a week from today, providing greater insight into how the current weather pattern is expected to impact production.
Meanwhile, things have improved dramatically from the droughts of the past several years in Argentina, where there’s a new enthusiasm for planting soybeans following the election of Javier Milei, who promised to slash taxes on agricultural commodities. Agricultural groups are encouraging Milei to act quickly to eliminate those taxes on his first day in office, leading farmers there to hold onto existing inventories until they see what happens. Both tax policy and currency policy will have a big impact on future sales. Regardless, it means little movement of grains until farmers there know more about future policy, and that means little crush activity for soybeans as well, leaving Brazil and the United States to fill the bulk of global meal demand in the meantime. However, the potential exists for a surge of soybean sales and crush activity in the months ahead, depending on Milei’s ability to implement his promised reforms. That won’t be easy, considering Argentina’s massive debt and economic challenges.
