Perspective: Morning Commentary for October 18

By: Arlan Suderman, Chief Commodities Economist

Tue, 18 Oct 2022, 13:23

Perspective: Morning Commentary

Arlan Suderman

Chief Commodities Economist

October 18 – Stock futures soared again this morning as early earnings reports ease concerns about the economy. Ironically, it’s that resiliency in the economy that suggests that systemic inflation will remain a problem for the foreseeable future, requiring more aggressive action from the Federal Reserve. But for now, the proverbial “glass is half full” in the eyes of Wall Street traders. Nonetheless, note that the VIX remains elevated, as it trades near 31 this morning, reflecting that anxiety levels remain high on Wall Street. The dollar index is trading near 111.9 this morning. Yields on 10-year Treasuries are trading near 3.99%, after once again failing to sustain a move above 4.0%, while yields on 2-year Treasuries are trading near 4.46%. Crude oil prices are 1% lower in early trade, while the grain and oilseed markets are all weaker as well to start trade today.

Russia continues to strike back at Ukraine’s infrastructure, trying to break the spirit of the Ukrainian people as winter starts to set in, even as Ukraine’s troops continue to reclaim territory in the eastern part of that country. Russia has destroyed nearly a third of Ukraine’s power stations over the past week in an apparent attempt to set up a miserable winter for Ukrainian citizens. Ukraine authorities claim that Russia hit water infrastructure as well. A Russian drone strike hit storage facilities at Mykolaiv on Sunday night, setting sunflower oil contained in the structures on fire. Several more explosions were seen in Mykolaiv early today, hitting mostly civilian targets this time. The stepped-up efforts to demoralize the Ukrainians comes after President Putin named General Sergei Surovikin as overall commander of the war in Ukraine. Surovikin previously served in Syria and Chechnya where Russian forces turned cities to rubble with a scorched earth mentality, giving him the nickname “General Armageddon” by the Russian media. Many of the missile attacks are hundreds of miles away from the front line of the war as he tries to break the will of the Ukrainian people headed into winter.

Water levels continue to recede on the Mississippi River, slowing barge traffic on this major U.S. waterway. Barges trying to move grain down river before it freezes next month are only able to be filled to 60 – 70% of capacity, with traffic limited to one direction at a time in some locations. The restrictions also slow movement of fertilizer back up the river for the fall application season as well. Water levels are near those reached in 2012, making them the fifth lowest on record. Current forecasts suggest that water levels will fall to the third lowest on record over the next couple of weeks, adding to shipping problems on the river. A weather system is expected to bring increased chances for rain to the western Midwest early next week, but rainfall totals are not expected to be sufficient to restore meaningfully water levels.

China picked up the pace purchasing soybeans in the week ending October 14 – its first full week back from the Golden Week holiday. Chinese buyers bought 23 cargoes of soybeans during the week, but low water problems on the Mississippi continued to divert business away from the United States. China bought six cargoes for November shipment last week, with half of those originating in Argentina and Brazil, and the rest coming from the U.S. Pacific Northwest. Buyers continue to be reluctant to book additional shipments from the U.S. Gulf, not knowing when conditions might improve, or how bad they might get before they do improve. Chinese buyers booked 13 cargoes for December and January shipment from the PNW. It also committed to two U.S. February cargoes and two Argentine shipments for the next calendar year. It’s believed that Brazil still has nearly four million metric tons available for shipment ahead of the 2023 harvest, that could actually start in late December this year. It’s estimated that Chinese crushers have just 23% of their December coverage, and roughly half of that covered for January at this time, while nearly half its needs are covered for February and March.

A strong dollar and low water levels on the Mississippi are combining to ration export demand for U.S. corn, soybeans, and wheat. Extremely high barge rates create more demand for rail, keeping freight rates high there as well. Is that rationing sufficient to fix the balance sheet, considering this year’s smaller crops? That’s largely to be determined yet, since we do not yet know the final size of this year’s crops. Harvest continues to advance rapidly amid the dry weather, which means that USDA should have a pretty good handle on the size of this year’s corn and soybean crops by the November 9 crop report. The general expectation is that small crops get smaller, although the debate will continue to be over the scope of that decline. Market focus is increasingly shifting to South American weather, which is dry for Argentina and favorable for Brazil, although Brazil is expected to dry out in November.

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Perspective: Morning Commentary for August 7

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Mike CastleThu, 06 Aug 2026, 13:24

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Perspective: Mid-Day Commentary for August 5

August 5 – The Dow Jones is ripping higher for yet another session, up safely over 500 points at the time of this writing to carve out another record high; the S&P and NASDAQ are a bit less enthusiastic but the former is still making its own record high, while the latter is less than 500 points off its own top thanks to a strong ongoing week of trade. The dollar is churning lower this morning in an effort to re-test Monday’s 1 ½-month low, while the ten-year note has flipped higher in the mid-morning hours. The CME FedWatch tool interesting has market odds of a quarter-point rate hike next month coming closer to a 50-50 proposition as crude oil prices decline.

Mike CastleWed, 05 Aug 2026, 15:19

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