Perspective: Morning Commentary for October 20

By: Arlan Suderman, Chief Commodities Economist

Wed, 20 Oct 2021, 13:30

Perspective: Morning Commentary

Arlan Suderman

Chief Commodities Economist

October 20 – The reality of long-term supply-chain disruptions is the primary topic of conversation on Wall Street today, keeping a lid on buying interest in the equities as inflation indicators continue to rise. Yet, the VIX traded to a fresh two-month low this morning near 15, reflecting a lack of panic on Wall Street. The Federal Reserve is scheduled to release its Beige Book assessment of the economy early this afternoon that policy makers will utilize when discussing monetary policy changes in two weeks. The dollar index firmed to trade near 93.8 after yields on 10-year Treasuries hit a fresh five-month high above 1.67%, although they have since puled back to trade near 1.63%. Crude oil prices are down 1% as they consolidate below this week’s fresh seven-year highs amid reports that coal prices fell in China, while the Ags traded mostly higher overnight.

A shortage of turkeys for Thanksgiving provided today’s headline story on one of the business networks, leading to more pictures of empty store shelves for a number of different items. Consumers are being warned that they should order Christmas presents now, but that they still may not arrive prior to the holiday. Many consumers are heeding the advice, further adding to the supply chain problems of hyper demand putting added stress to freight systems. The consumer remains rich with cash that they are eager to spend, thanks to unprecedented fiscal and monetary stimulus initiated during the pandemic.

There’s nearly three times the currency in circulation now in the United States than there was prior to the pandemic. That money is being spent, creating added demand for goods and services. Every member of the supply chain from the manufacturer through every step of the transport system to the retail store has a financial incentive to deliver the goods, but a shortage of labor hampers their ability to do so, creating more worries of shortages, which incentivizes the consumer to step up their holiday buying, further aggravating the problem. As such, the supply chain issues are not likely to go away prior to the holidays, and ultimately it isn’t expected to go away until demand slows. That slower demand could come as a result of a decline in the supply of money (tapering) or a sharp decline in consumer confidence, or some combination. The labor shortage should also improve if the supply of money declines, requiring more people to return to work. The bigger question being debated on Wall Street and in the halls of Congress is whether the current spending bills being debated will contribute to the problem or be part of the solution. One’s view on that depends on your position on Modern Monetary Theory, which I’ve previously covered.

China’s latest Covid outbreak is growing – not by the standards of much of the rest of the world, but certainly by China’s standards. Officials reported 17 new local infections today spread across seven different provinces. The current outbreak seems to have started with a tour group traveling the country. The group all tested negative at the start of the tour, but picked up the virus somewhere along the way, spreading it to multiple provinces as they traveled. That triggered mass testing, along with a tourism and travel shutdown, and the quarantine of potential contacts along the way. China Direct, from our Shanghai office, noted that health officials had recently commented that they might loosen Covid restrictions if the country gets to 80 – 85% vaccinated. The latest data shows that 75% of China’s population is fully vaccinated, while 82% have received at least one shot of the vaccine.

Chinese coal prices fell the daily limit today after the government stepped in to ensure adequate supplies. That doesn’t mean the problem will be fixed, but it does indicate that solving the problem is a priority of the government. Officials made similar promises to guarantee adequate supplies of fertilizer to domestic crop producers. That appears to mean limited exports to foreign customers, further aggravating the global shortage of supplies headed into production of the 2022 crops. Chinese custom officials stated Friday that inspection certificates would be required to ship fertilizer and related materials, which is being interpreted as a ban on exports. Chinese phosphate exports account for nearly a third (32%) of the global market.

Grain and oilseed prices found additional buying support overnight as the inflation trade on Wall Street supports efforts of the corn and soybean market to carve out harvest lows. We haven’t had a flash export sales announcement from USDA all week, although it is believed by many that China is in the market for soybeans. The inflation story shows no signs of going away soon, and it is expected to remain a factor shaping how the market manages supply and demand in the months ahead, as outlined above.

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Perspective: Mid-Day Commentary for August 7

August 7 – Stocks are looking to end a strong week on a strong note, with the major indexes all in the green at the time of writing. The VIX touched a nearly seven-month low earlier in the session and remains muted as it hovers just below the 15-mark as this morning’s ugly labor market data helps ease hawkish Fed jitters. The dollar has rebounded from its nearly two-month low earlier in the session but remains in the red on the day, trading at 99.55 at the time of writing. Treasuries have had a very volatile day, with yields tanking following this morning’s Non-Farm Payrolls release but bouncing back into midday, with 30-year yields now trading at 5.209%, 10-year yields trading at 4.654%, and 2-year yields trading at 4.204%. Crude oil has risen from the morning lows as traders eye the weekend market closure for potential geopolitical developments, with nearby WTI now down only 0.2% on the day to trade around $78.10 and nearby Brent breaking into the green, up 1.25% on the day to trade above $83.50. The ags are largely mixed, with the grains and oilseeds mostly in the green, save for a mixed picture in the soy complex, while live and feeder cattle futures move in opposite directions, with the former adding to yesterday’s sharp losses and the latter attempting a rebound.

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Perspective: Morning Commentary for August 7

August 7 – The U.S. economy unexpectedly lost 23k jobs in July, dramatically below market expectations of an 80k increase and marking the worst Non-Farm Payrolls print since February. Furthermore, May and June were both revised sharply downward, with combined revisions showing 103k fewer jobs than previously reported. Outside of the healthcare sector, which added 22k jobs in July, the losses were very broad-based. Government payrolls saw the largest decline, shedding 53k jobs in July, the largest seen since October 2025, while June was revised down to show a loss of 10k jobs as well. The private sector at least saw growth, adding 30k jobs in July, now matching the month prior after it was revised down from the 49k initially reported, and substantially missing forecasts of 78k jobs being added. This is a sharp reversal in course from the largely better than expected U.S. labor data seen earlier this week.

Mike CastleFri, 07 Aug 2026, 13:26

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