Perspective: Mid-Day Commentary for October 31

By: Arlan Suderman, Chief Commodities Economist

Tue, 31 Oct 2023, 16:53

Perspective: Mid-Day Commentary

Arlan Suderman

Chief Commodities Economist

October 31 - End of the month trade provided much of the focus thus far today, while traders also ponder what the Federal Reserve might say tomorrow, while they also monitor headlines coming out of the Middle East. Earnings reports have been underwhelming to some extent, raising some concerns about the economy as well. Stocks are mixed at midday, while the VIX is trading near 19, reflecting easing concerns on the Street. The dollar index is trading near 106.8, having rallied as the euro broke today. Yields on 10-year Treasuries are trading near 4.87%, while yields on 2-year Treasuries are trading near 5.08%. Crude oil prices are modestly lower at midday, while the grain and oilseed markets are mixed in relatively quiet trade.

Wheat prices continue to erode lower amid the increase in supply of cheap wheat coming out of Ukraine, on top of the massive supply of cheap wheat coming out of Russia. Kansas City leads the way lower for the wheat complex as it continues to erase its large premium to the Chicago market. Simply put, wheat is seeking demand, and that takes lower price levels to do so, making the path of least resistance lower thus far. Soybean prices rebounded today from yesterday's lower trade. November soybeans went into delivery today, with the January contract taking the lead on the board. January soybeans held modest chart support, leading fund managers to turn buyers again. Fundamentally, strong soymeal demand on the export market provides support, with solid domestic demand as well. Traders are also monitoring dry conditions in Center-West Brazil, where some areas face replanting decisions due to the dryness. Rains in the forecast for this weekend and beyond could dramatically improve the situation, but traders also know that past forecast events failed to verify, so some risk premium in prices may be justified. Corn is largely a follower. December corn also held areas of chart support, similar to soybeans, inviting technical buying today. However, gains are limited by large domestic supplies and relatively weak demand.

The consumer confidence index slipped lower to 102.6 in October, down from 104.3 in September, but above analyst expectations of 100.0. Both the present situation index and the expectations index saw modest declines this month. The present situation index fell to 143.1 this month, down from 146.2 the previous month. The expectations index that measures consumer confidence six months out fell to 75.6 in October, down slightly from 76.4 in September. It's first noteworthy that the expectations index remains below 80, which historically has been an indicator of a coming recession. Second, note that we continue to have a great deal more confidence in the current environment than we do in what is coming six months from now, but the feared scenario down the road still hasn't developed. Nonetheless, consumers noted that they were preoccupied by rising food and gasoline prices, while also mentioning the current political situation and rising interest rates. The above factors have consumers worried about the future of our economy, along with rising concerns about the war in the Middle East. Consumer plans to buy appliances and autos continues to trend higher, while plans to buy a home are on decline, as a result.

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