Perspective: Morning Commentary for October 6

By: Arlan Suderman, Chief Commodities Economist

Wed, 06 Oct 2021, 13:26

Perspective: Morning Commentary

Arlan Suderman

Chief Commodities Economist

October 6 – Inflation fears sent stocks sliding overnight as crude oil prices reached nearly seven-year highs and yields on 10-year Treasuries traded to fresh three-month highs, increasing demand for the dollar in the process. The VIX is trading near 23 this morning, reflecting elevated concerns about the economy. The dollar index is trading just below one-year highs at 94.3. Yields on 10-year Treasuries are trading near 1.52%, after pushing above 1.57% earlier in the session. Crude oil prices are down nearly 1% in a reversal following their overnight surge to new highs. The Ags are mostly higher in early trade.

Profit taking pulled crude oil prices off one-year highs this morning, but the broader markets are still responding to the additional signs of inflation. OPEC+ will keep its plan in place to gradually increase output, which raised fears that supplies would tighten further as the global economy expands following the pandemic. Rising U.S. supplies also helped trigger the profit taking. However, the industry remains concerned about tightening global supplies ahead of the Northern Hemisphere winter, with both natural gas and coal prices hitting new all-time highs in some areas of the world amid shortages. Rising energy prices threaten to prolong the Federal Reserves’ “transitory” inflation pressures, with other supply chain disruptions also still very much at play as well. There’s a growing resignation on Wall Street, and in Washington, D.C., that the transitory inflation is becoming more perpetual in nature, which is something we’ve been arguing all along. Yes, a number of transitory factors were, and continue to be, present. But hyper-demand due to record large and duration fiscal and monetary stimulus continues to aggravate the situation, escalating inflation pressure. This raises concerns on Wall Street that the Fed will be forced to be more aggressive in its tapering and rate hikes to bring the problem under control, because it was slow to recognize the problem in a timely manner. We only need to look back four decades to the Paul Volker era to see the potential implications.

The problem is, the U.S. economy is now addicted to the stimulus, and breaking that addiction can be painful. The Federal Reserve purchased more than half the government’s debt over the past year and a half through its quantitative easing program. Reducing those purchases at a time when government spending is rising necessitates escalating yields to attract new buyers of the debt certificates. That can raise interest rates in the marketplace at a much faster pace than desired for sustaining economic growth. Furthermore, yields have been held down by the massive amount of money sloshing around in the banking system due to current stimulus programs, which gets parked in the Treasury market. Reducing that supply of cash also allows yields to rise. Those are but a few of the concerns being discussed on Wall Street currently that raise fears of a stagnating economy.

Automated Data Processing Inc. reports that private payrolls increased by 568K in September, up from 340K in August and beating analyst expectations of 428K private-sector jobs created during the month. The correlation is not always strong, but today’s better-than-expected ADP report raises optimism for Friday’s monthly jobs report from the Department of Labor. That report is expected to show that the unemployment rate slipped to 5.1% in September, with non-farm payrolls rising by 475K, after a disappointing report a month ago showed just 235K jobs created in August. Much of the disappointment a month ago was blamed on the Delta variant of Covid-19, but those numbers have been declining over the past month. The Centers for Disease Control reported a 10-week low 71,127 positive Covid-19 tests on Monday, the latest date for which data was available this morning. That pulled the seven-day moving average to a two-month low 97,909 positive tests. Covid-related hospitalizations peaked at the end of August, falling to nearly half that level by the last full week of September, leading to fewer Covid-related deaths as well. The CDC reported 1,032 Covid-related deaths on Monday, dropping the seven-day moving average to 1,444, which is a new five-week low. These numbers are positive for both the economy, and for demand for commodities.

Rapidly rising demand for edible oils for the production of the new generation of renewable fuels created a surge in palm, canola and soyoil prices, which in turn supports soybean prices. The Ag sector found a buy from the inflation talk this morning, while the edible oils story helps stabilize soybean prices following Thursday’s bearish USDA stocks report. USDA raised its soybean ending stocks estimate for the 2020-21 marketing year to 256 million bushels, up 65% from its August estimate. That’s just 5.8% of usage, so we’re not swimming in soybeans. Yet, yield estimates are creeping higher and rapidly escalating fertilizer prices suggest rising acreage next year. Yet, that is offset by new long-range European model forecasts that are quite dry for the Argentine and southern Brazil summer.

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Perspective: Morning Commentary for August 6

August 6 – This morning’s stronger-than-expected U.S. labor data offered markets some relief, reinforcing confidence in the economy while giving the Fed greater flexibility to raise rates should inflationary pressures reaccelerate in next week’s July data. Stock futures are pointing to a mixed open to start the day, with the tech-heavy Nasdaq showing the most weakness. The VIX has fallen notably from yesterday’s spike above 18.4 as it starts the day hovering just below the 16-mark. The dollar is quietly higher as it trades just above 99.8, holding in the tight range seen thus far this week as traders continue to digest data to shape expectations for the Fed’s next move, which we’ll dive into in more depth below. Long-term treasury yields have relaxed slightly from their recent spike, with 30-year yields starting the day trading just above 5.19%, while 10-year yields trade above 4.64%, and 2-year yields sit below 4.22%. Crude oil is modestly higher to start the session after sharp declines earlier in the week, with nearby WTI up 1.8% to trade at $76.40 and nearby Brent up 2.4% to trade at $81.40. Meanwhile, the ags are quietly mixed to start the day.

Mike CastleThu, 06 Aug 2026, 13:24

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Matt ZellerWed, 05 Aug 2026, 12:39

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Morning Grain Comments 8-5

Morning Grain Market Comments - Matt Zeller

Matt ZellerWed, 05 Aug 2026, 11:54

Grains & Oilseeds

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