Perspective: Morning Commentary for April 7

By: Arlan Suderman, Chief Commodities Economist

Thu, 07 Apr 2022, 13:21

Perspective: Morning Commentary

Arlan Suderman

Chief Commodities Economist

April 7 – The path of least resistance has been higher for Treasury yields as Wall Street frets about inflation, and about the Fed’s anticipated path for managing it. That has stocks under modest pressure again this morning, after the tech sector led the sell-off the past couple of days. The VIX is trading near 22 this morning, reflecting a bit of easing of anxiety on Wall Street. The dollar index set a new 22-month high earlier today, before calming to trade near 99.6 currently. Yields on 10-year Treasuries are trading near 2.64%, after setting a new three-year high just below 2.66% on Wednesday. Crude oil prices are 1% higher this morning, while the grain and oilseed markets are mixed to lower ahead of tomorrow’s USDA WASDE crop report.

The minutes of the March Federal Reserve meeting were released Wednesday afternoon, providing more insight into the discussions inside of the Federal Open Market Committee that sets monetary policy for the United States. Probably the most interesting reading (that’s a stretch) revolved around the committee’s discussions about shrinking the balance sheet, which is the Fed’s method for withdrawing the trillions of dollars of stimulus still in the economy. There were many views on the best way to do this, but there was general agreement that shrinking the balance sheet was a) essential for taming inflation, b) could probably start immediately after the May 4 meeting, and c) ideas focused on a pace that would initially reduce its ownership of Treasuries by $60 billion per month and mortgage-backed securities by $35 billion per month. That combined pace of reducing its balance sheet by $95 billion per month, as well as the make-up of the reductions, will surely be discussed again at the meeting on May 3^rd & 4^th, but if it holds, would be roughly twice the pace seen in 2017-2019. All but one voting member supported raising the Fed’s benchmark interest rate by 25 basis points at the March meeting, but comments made by members since that meeting built expectations into the market that we’ll see 50-basis point increases in both the June and July meetings, followed by a 25-basis point increase again in September.

The Fed finally appears to grasp the seriousness of the inflation problem, but it missed the best opportunity to tighten. That best would have occurred in the second, third and fourth quarters of last year when the economy was booming, but now the Fed finds itself facing much stronger inflation at a time when growth in the economy is slowing. Failure to do enough risks even higher inflation with a stagnated economy. Getting too aggressive risks pulling the economy into recession. The market is currently worried that it will error on being too aggressive in its actions, pulling us into a recession. That sentiment weighed on stocks Wednesday, as well as on commodity prices, although release of the minutes actually seemed to provide some reassurance to traders. The Fed minutes mentioned that it may get more aggressive in reducing its ownership of mortgage-backed securities once the program is underway with a chance to monitor the results. That could provide more support for the long end of the yield curve, as the Fed would likely to get back to its balance sheet being made up primarily of Treasuries.

Ukraine ports accounted for 98% of that country’s exports prior to Russia’s invasion in late February, but they have been blocked and unable to function in that capacity since that time. Exporters quickly began to search for other avenues to move grain, beginning to move it west on rail to the border with Poland. But there’s a problem with that. Ukraine’s railroad network is built on the old Russian gauge that measures 10 centimeters wider than Poland’s western railroad tracks. As such, staff must lift the hopper wagons with a jack to manually change the chassis to fit the Polish tracks. The alternative is to unload the grain from the Ukraine hopper cars to move it to Polish cars. As such, some 1,100 hopper cars are said to be backed up at Ukraine’s border with Poland. These are just some of the infrastructure issues that currently limit the volume of grain that Ukraine can export. The bulk of that grain then can flow to the Danube River, where it can then be barged to Romanian ports for shipment. Meanwhile, some reports suggest that Russian wheat shipments are running at about 80% of pre-war levels, although payment is difficult.

Brazil’s CONAB lowered its soybean production estimate to 122.4 million metric tons this morning, down from 125.5 mmt previously, and very close to StoneX at 122.1 mmt. CONAB put total corn production at 115.6 mmt, up from 112.3 mmt previously, although still below StoneX at 118.6. Yet, the large safrinha crop is still largely heading into the critical pollination phase, with a dry forecast for the northern half of the belt. Roughly a quarter of the crop is currently said to be encountering some degree of stress. USDA is expected to adjust its estimates tomorrow, while some downward adjustments could also be seen for Argentina.

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Perspective: Morning Commentary for August 6

August 6 – This morning’s stronger-than-expected U.S. labor data offered markets some relief, reinforcing confidence in the economy while giving the Fed greater flexibility to raise rates should inflationary pressures reaccelerate in next week’s July data. Stock futures are pointing to a mixed open to start the day, with the tech-heavy Nasdaq showing the most weakness. The VIX has fallen notably from yesterday’s spike above 18.4 as it starts the day hovering just below the 16-mark. The dollar is quietly higher as it trades just above 99.8, holding in the tight range seen thus far this week as traders continue to digest data to shape expectations for the Fed’s next move, which we’ll dive into in more depth below. Long-term treasury yields have relaxed slightly from their recent spike, with 30-year yields starting the day trading just above 5.19%, while 10-year yields trade above 4.64%, and 2-year yields sit below 4.22%. Crude oil is modestly higher to start the session after sharp declines earlier in the week, with nearby WTI up 1.8% to trade at $76.40 and nearby Brent up 2.4% to trade at $81.40. Meanwhile, the ags are quietly mixed to start the day.

Mike CastleThu, 06 Aug 2026, 13:24

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Matt ZellerWed, 05 Aug 2026, 12:39

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Perspective: Mid-Day Commentary for August 4

August 4 – The Dow Jones is absolutely piling on gains today, adding a similar number that led to yesterday’s record, with the benchmark index now nearing the 54k-point mark through mid-morning. The S&P also hit a new record, while the NASDAQ is exceeding both those gains on a percentage basis. The marketplace is optimistic on a U.S.-Iran trade deal, though the proposed resolution is still being “circulated between the parties”.

Mike CastleTue, 04 Aug 2026, 14:58

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