Kansas City Wheat Report
Kansas City Wheat Report
Mike O'Dea
- Grains & Oilseeds
Perspective: Morning Commentary for June 5
By: Arlan Suderman, Chief Commodities Economist
Today's Perspective Video: New World Screwworm Confirmed in Texas: What it Means for the Meat Industry
June 5 – Stock futures were mixed overnight ahead of this morning’s monthly jobs report, even as prospects for a peace deal with Iran seem to be slipping away. The VIX is trading below 16 this morning, while the dollar index trades near 99.6 – its highest level since early April as Treasury yields pop following the jobs report. Yields on 10-year Treasuries are trading near 4.53%, while yields on 2-year Treasuries are trading near 4.13%. WTI crude oil is trading near $92 per barrel, while Brent trades near $94 per barrel. The grain and oilseed markets did a bit of consolidation overnight following their recent collapse, although corn prices put in new lows for the move.
Iran formally tied any hopes for a peace deal to Israel’s withdrawal from Lebanon and a stoppage of its strikes on Hezbollah. That reduces the odds of seeing a peace deal with Iran any time soon. Israel is not about to stop defending itself from the constant attacks by Hezbollah, which is an Iranian backed force occupying Lebanon. Iran hopes that it can leverage President Trump’s desire for a peace deal with it to get Israel to give in on Hezbollah, but I don’t expect that to happen – unless just for a short time to appease President Trump. Israel’s survival depends on its ability to defend itself. Besides, I remain convinced that Iran doesn’t want a peace deal with the United States, but rather it simply wants to keep those hopes alive to prevent President Trump from blitzing it with military strikes. In reality, I believe that this is all part of Iran’s stall tactics to drag this out to the midterm elections, when Iran hopes that political defeat will remove Trump’s power from the region. It’s all part of the strategy of war. Meanwhile, movement through the Strait of Hormuz remains very limited, with the global energy deficit continuing to grow.
The U.S. economy created 172K jobs in May, which is essentially twice analyst expectations of 85K job creations. Furthermore, April job creation was revised up by 64K to 179K, while March was revised up by 29K to 214K. That’s a total of 93K more jobs added in March and April than were first reported for those months. The unemployment rate remained unchanged at a historically low 4.3%. with the labor participation rate unchanged at 61.8%. Average hourly earnings were up 0.3% on the month, and up 3.4% on the year – both matching expectations. The average workweek remained unchanged at 34.3 hours. This makes it easier for the Fed to raise rates later this year.
Leisure and hospitality added another 70K jobs in May, versus the average monthly gain over the past year of 14K new jobs. This reflects some business optimism in that sector as we head into the summer season. Local government employment rose by 55K in May, excluding education, which added another 44K. Healthcare added 35K jobs, which is very close to what it normally does each month. Gains in ambulatory health care added 26K jobs, including another 11K for home health care services, as our population ages. Mining, quarrying, and oil and gas extraction added 5K jobs in May, while manufacturing added 7K. There was little change in May for construction, wholesale trade, retail trade, information, and professional and businesses services. Financial services employment dropped by 22K jobs in May. This sector is down by 107K jobs over the past year. Some will blame this decline on artificial intelligence adoption, and that is certainly a contributor. But much of the decline can also be attributed to this sector right-sizing after over-hiring during the good times post-pandemic. The same can be said for the technology sector as well.
Chinese President Xi is scheduled to visit North Korea on Monday and Tuesday of next week to have a summit with Kim Jong Un. It will be Xi’s first trip to North Korea since 2019, and his second visit as president. It warrants asking the question, why is Xi traveling to North Korea? After all, isn’t Xi the “big brother” in this relationship? Not really, and that’s the concern for Xi. Moscow has been quietly building economic and military partnerships with North Korea, reducing North Korea’s dependency on China. Russian support includes oil, food, military technology, among other things. This gives Kim Jong Un added leverage in his relationship with China. Keep in mind that one of Xi’s biggest concerns in early 2025 was that peace would come to Ukraine, allowing Russian President Putin to establish a working relationship with President Trump. None of the three major leaders trust each other, but any of them would be happy to leverage one of the others against the third. There is currently incentive for Putin to align with Xi in Russia’s battle against the West, and Xi would like to keep it that way. Otherwise, Putin might start focusing on the China risk on Russia’s southern flank. Both leaders are always thinking long-term – unlike in America when we think merely in terms of the next election cycle. A partnership with North Korea could be very strategic for Putin if/when he ever becomes at odds with China, and Xi wants to make sure that such a relationship doesn’t become too cozy – especially if North Korea has nuclear weapons, which makes Xi even more uncomfortable. As such, he needs to do what he can to keep Kim Jung Un in his corner, and thus the upcoming summit next week.
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