Perspective: Mid-Day Commentary for November 7

By: Arlan Suderman, Chief Commodities Economist

Mon, 07 Nov 2022, 17:41

Perspective: Midday Commentary

Arlan Suderman

Chief Commodities Economist

November 7 - Stocks are mixed at midday, tech sector continuing to struggle amid rising interest rates, while the Dow posts modest gains. The VIX is trading near 25 at midday, while the dollar index is trading lower near 110.2. Yields on 10-year Treasuries are trading near 4.21%. Crude oil prices are modestly higher, while the Ags are mixed in relatively quiet trade ahead of Wednesday's monthly USDA crop report.

Wheat prices bounced off areas of chart support today as traders monitor discussions relative to the extension of the trade agreement that allows Ukraine to ship agricultural commodities and products from three ports on the Black Sea. The current agreement expires in 12 days, with Russia threatening to block extension of the agreement. Meanwhile, soybeans are giving back a portion of the late week rally tied to rumors that China was about to reopen its economy. Those rumors were temporarily squelched over the weekend when health officials restated their commitment to the dynamic-zero Covid policy. Corn prices are caught between the above two commodities, as they ride along the bottom of the trading range that has contained prices over the past six to eight weeks. Traders of all three commodities are also assessing their positions ahead of Wednesday's USDA crop report.

Live cattle futures slowly built upward momentum through the morning, building off the base of last week's consolidation on the charts after recent declines. Last week's cattle harvest by processors totaled 667K head, up 15K or 2.4% from the same week last year and above expectations. Packers continue to pull in large numbers of cattle to gain ownership of the inventory ahead of what is expected to be a notable decline in supplies in the month's ahead due to contraction of the breeding herd over the past couple of years. Lean hog futures pushed sharply higher this morning, largely on the back of a couple of spurts in purchases in what appears to have largely been technical buying as fund managers defend their positions, adding to them as prices rose above various technical points this morning.

USDA inspected just 9.1 million bushels of corn for export shipment in the week ending November 3, as shown below, which was a 13-month low. The agency also inspected 95.2 million bushels of soybeans, 6.7 million bushels of wheat and 0.2 million bushels of grain sorghum for export shipment. It's interesting to note that 67.6 million bushels of the soybeans inspected for export were destined for China. That helps close the gap a bit for soybeans in their attempt to catch up with the pace needed to hit USDA's target for the year, while the corn gap continues to widen. Marketing year to date corn export inspections total 175 million bushels, which is 132 million bushels below the seasonal pace needed to hit USDA's target, and the deficit continues to grow. Marketing year to date soybean inspections total 471 million bushels, which falls short of the seasonal pace needed to hit USDA's target by 73 million bushels. That deficit is slowly closing, although I expect USDA to reduce both its corn and soybean export targets on Wednesday - corn more so than soybeans for now. Marketing year to date wheat export inspections actually exceed the seasonal pace needed to hit USDA's target by 16 million bushels, although that gap is slowly disappearing.

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