Perspective: Mid-Day Commentary for February 17

By: Arlan Suderman, Chief Commodities Economist

Fri, 17 Feb 2023, 17:35

Perspective: Midday Commentary

Arlan Suderman

Chief Commodities Economist

February 17 - Stocks were generally weaker heading into a three-day holiday weekend, but losses are minimal thus far. The dollar pulled back from its six-week highs to trade near 103.9, as 10-year Treasury yields pulled back from their three month highs to trade near 3.84%. That precipitated some strength in the grain and oilseed markets, as they defended the bottom of their ascending channels on the charts. The exception was crude oil, which continues to post nearly 3% losses on recession concerns. Prices there are gyrating in a broad roughly $10 trading range. It's interesting to note that with all the talk of a short soybean crop in Argentina that total South American production is still expected to see a significant increase in output this year, as shown in the graphic below. So, it will be more of a question of logistics - moving soybeans south to Argentina - than it will be total production.

The index of leading economic indicators is a composite of 10 forward-looking components designed to predict economic conditions six months out. A number above zero suggests economic growth, while a number below zero suggests a slowing economy. The LEI index for January came in at -0.3%, which matched analyst expectations, although that is better than the -0.8% posted the previous month. That suggests that the economy will struggle six months out, but that those headwinds may not be as strong as what was anticipated a month prior. E-commerce retail sales were -0.1% in the fourth quarter of 2022, which included the Christmas holiday shopping season. That was much worse than the 1.6% growth expected by analysts, and dramatically worse than the 3.0% growth seen the previous quarter. Treasury yields fell back from their three-month highs on the data's release, which then precipitated a pullback in the dollar from its six-week highs. The logic behind that was that today's data provides an argument against the Federal Reserve becoming more aggressive in its monetary tightening.

Market bulls put much of their hope into China's economic recovery following three years of Covid lockdowns and restrictions. Those signals remain mixed to this point. The 40-day "spring travel rush" for China extends from January 7 to February 15. That period came at the end of its Covid outbreak this year, while its Lunar New Year holiday fell in the middle of that period. Chinese data shows that 4.73 billion passenger trips were made during the period, which was only 54% of pre-pandemic levels in 2019. However, data from the seven-day Lunar New Year holiday saw travel numbers at 90% of pre-Covid levels. Data from China's Civil Aviation Administration showed that 55.2 million people traveled by air during the 40-day window, up 39% from the previous year, but that was just 76% of pre-pandemic levels. So, we've seen a surge in economic activity following the Covid outbreak when restrictions and lockdowns were lifted, but the numbers are still struggling to get back to pre-Covid levels. International travel is still only at 9% of pre-pandemic levels. That's expected to change as we go through the year, which is expected to increase global crude oil demand by nearly 1 million barrels per day for the year. China is expected to account for a large portion of that. Restaurant activity is picking up. We don't have a lot of data on that yet, but we do expect to see an increase in demand for the food commodities as people enjoy the freedom of going out to eat again.

Grains & Oilseeds

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Perspective: Mid-Day Commentary for August 7

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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.

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