Perspective: Mid-Day Commentary for June 22

By: Arlan Suderman, Chief Commodities Economist

Wed, 22 Jun 2022, 15:59

Perspective: Midday Commentary

Guest Commentary by Mike Castle

Market Intelligence - Fertilizer Analyst

June 22 - Stocks have shaken off early morning losses and turned higher following Fed Chair Powell's comments, while the VIX has fallen to trade below 30. The dollar has retreated considerably from overnight highs, down near 103.7, while yields on 10-year treasuries are also down, trading near 3.17%. Crude oil is sharply lower on the day, though off its lows from earlier in the session, while the ags are mixed with the wheat complex largely higher but corn/soybeans struggling.

Federal Reserve Chair Jerome Powell began his testimony to the Senate this morning, kicking off two days of economic discussion during a time of panic over runaway inflation. His comments so far appear be easing the trade's sentiment to an extent, with stocks rebounding through the morning and turning positive. In a shift to more honesty, Powell said "inflation has obviously surprised to the upside over the past year, and further surprises could be in store." The Fed's unwillingness to act sooner certainly played a major role in getting us to where we are today, but their more aggressive action of recent may signal that they're ready to do what's necessary to get things under control. Expectations of another 75 basis point hike at next month's meeting are now fully priced in, with expectations of the Fed's policy rate reaching 3.50% - 3.75% by the year's end. Despite some amount of increased optimism, it's still hard to see a soft landing for the time being.

Russia has resumed its air strikes on two major cities, Kharkiv and Mykolaiv, that have largely been out of the action since the shift in focus to the Donbas region in eastern Ukraine. Mykolaiv, Ukraine's second-largest port, was one of the origins in play for the potential clearing of the Black Sea in order to allow the export of food commodities to countries in need. However, in the midst of these talks during the first week of June, Russian missiles struck an export facility in Mykolaiv, burning large quantities of sunflower meal inside. Now, during Wednesday's strikes, Russian missiles hit another export facility, this one owned by Viterra, setting it ablaze. Despite all the talk from Russia regarding the need for humanitarian corridors through the Black Sea to help feed those Middle-Eastern and North African countries who are heavily reliant on Ukraine's ag products, their actions continue to show quite the opposite intent, still aiming to weaponize food in order to gain leverage for their own cause. Further north, the attacks on Kharkiv are reported to be the worst in the region in quite some time, piling up civilian casualties as the Russians attempt to pull Ukrainian forces out of the Donbas in order to advance their position in the grinding battle of attrition for the nation's breakaway regions.

U.S. winter wheat harvest racked up solid gains week-on-week, with Oklahoma and Arkansas both harvesting over 40% of their respective crops in a week while Missouri and Kansas progressed 32% and 25% week-on-week, respectively with hot, dry weather helping speed things along. However, Oklahoma, Arkansas, and Missouri all saw anywhere from 3% - 7% declines in good/excellent conditions, perhaps a sign of lower than expected yields, while Kansas saw a 1% improvement to conditions, with anecdotal reports of better than expected yields and quality in some areas. Rains will slow progress in some areas where harvest is already underway, but the trade will continue to keep a close eye on how this harvest shakes out with its importance growing as the prospect of turning larger-scale Ukrainian wheat exports back on any time soon weakens.

Grains & Oilseeds

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Grains & Oilseeds

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