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Perspective: Mid-Day Commentary for December 5

By: Arlan Suderman, Chief Commodities Economist

Perspective: Mid-Day Commentary
 
Arlan Suderman
Chief Commodities Economist

Guest Commentary by Matt Zeller, Senior Market Intelligence Analyst

 

December 5 – S&P Global U.S. PMI numbers for November both came in right on expectations (and both unchanged from prior readings) this morning, with their Services figure at 50.8 and Composite at 50.7; the former was the highest reading since July 2023 and indicated the tenth consecutive month of expansion in the services sector. Meanwhile, their employment indicator of 50.2 was down from 51.7 in October and the lowest reading since October 2022. Speaking of employment, JOLTS job openings for October came in at 8.733 million, below 9.350 mln the month prior and the average trade estimate at 9.300 mln. That number has been on a general downslide since March 2022, when it topped 12 million. The trade will be looking for further indications of a cooling labor market the rest of the week, with more employment numbers on tap each of the next three days. Stocks are taking profits for the second straight day today with the DJIA down over 100 points, and bullish excitement hard to come by after the benchmark index hit the 36k mark on Friday. Uncertainty lingers over the Federal Reserve’s future plans…

 

The U.S. dollar index is trading only slightly higher at the time of this writing, but not before putting in a fourth straight higher high following last week’s nearly three-month low. The Forex market is awaiting the avalanche of employment data the rest of this week, trying to determine what the Fed will do next year in terms of interest rate policy. The CME’s FedWatch tool shows traders expecting a good chance for a 50 bps rate cut by June and at least 125 points for 2024; that remains in contrast with the latest Fed dot plot that shows a wide range of expectations from Fed participants, roughly averaging 5.0% for 2024 – down only 50 bps altogether.

 

Chicago wheat is leading the charge for the grain market this morning with the front end of that complex up double-digits as of the time of this writing. China bought another 198k tonnes (7.3 million bushels) of U.S. soft red winter wheat in a flash sale this morning, making that a combined 638k tonnes (23.4 mln bu) in the last two sessions, and five SRW flash sales since the start of October, totaling 1.15 MMT (42.2 mln bu). China certainly wouldn’t pay a premium to source wheat from the United States, so that’s a good sign that domestic futures have finally aligned themselves with world values. The March Chicago wheat contract picked up almost 80 cents from session lows a week ago today, to highs thus far this morning (interestingly, very near the 100-day moving average which is proving to provide some resistance). Fundamental grain and oilseed news is thin this week with a vanilla December USDA S&D expected on Friday. Commodity Weather Group’s 15-day outlook below shows good action for South American crop areas over the next two weeks, but around 20-25% of northern BRZ corn and soy areas remaining stressed.

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