Perspective: Morning Commentary for October 22

By: Arlan Suderman, Chief Commodities Economist

Fri, 22 Oct 2021, 13:32

Perspective: Morning Commentary

Arlan Suderman

Chief Commodities Economist

October 22 – The roller coaster on Wall Street continues, with stocks rising and falling from day to day based on the latest view of how the issues are impacting the economy. The issues are the same, with inflation and supply chain disruptions leading the headlines. Earnings reports have been strong overall, but we now get into more of the tech company reports, which may not be as glowing due to the same above problems. Nonetheless, the VIX traded below 15 early today, matching its Thursday low and the lowest it’s been since July 2^nd. The dollar index traded near 93.6, while yields on 10-year Treasuries traded near 1.67%, after hitting a fresh five month high above 1.70% on Thursday. Crude oil prices are 1% higher today as they consolidate just below seven-year highs, while the Ags benefited from broad-based money flow into the commodity sector as well. Big gains Wednesday turned into big losses on Thursday that are trying to rally again today to close the week.

Inflation expectations hit the European Central Bank’s 2% target, raising questions about how the ECB will handle it. The Federal Reserve changed its policy framework during the pandemic to allow for a significant over-shoot of the 2% level, saying only that it wants rates to average 2% over an unspecified period of time. However, the ECB tightened down its policy, stating that it wants to neither under- nor over-shoot the target. I should clarify that the data doesn’t show Europe hitting the 2% level yet, but the markets have priced in the expectation for the first time in seven years, reflecting what they believe to be the case. The above has implications for the U.S. markets as well.

The expectation increases pressure on the ECB to begin unwinding its pandemic-related policies, which could include more tapering and increased interest rates. Higher interest rates could reduce some of the foreign money coming into U.S. securities markets, reducing demand for the dollar, while allowing U.S. yields to rise at a faster pace. Higher yields and a weaker dollar would again be additional indicators of inflation for commodity traders. Of course, none of this happens on an island. The Federal Reserve will be meeting the first week of November to consider its timeline for tapering and interest rate hikes as well. Fed Chair Jerome Powell has been very reluctant to do either, but he has finally acknowledged the possible need for tapering. Meanwhile, members of his voting policy committee are shifting increasingly hawkish due to inflation pressures, raising the possibility that we could see one to three rate hikes next year. A hawkish move by the ECB would make it easier for the Fed to do so without risking as much detrimental strength in the dollar. It doesn’t eliminate the risk of a stronger dollar that could hurt trade, but it reduces the risk of such.

Natural gas prices are trading above $5.30 per MMbtu on the board this morning. That’s below this month’s seven-year high $6.46 price, and certainly below Europe’s recent prices above $25, but prices are still at historically high levels. Recent policy moves toward green energy have been pushing more users toward natural gas, while record high coal prices contributed to the shift as well. Reduced crude oil output at shale oil fields during the pandemic reduced natural gas output as well, leaving supplies at relatively low levels going into the Northern Hemisphere winter. That contributed to higher price levels as well. Those prices made it unprofitable to produce fertilizer relative to other alternatives, shutting down a number of plants in the global market, tightening the global supply. U.S. natural gas stocks are 458 Bcf below last year and 151 Bcf below the five-year average for this time of year, although they did rise by 92 Bcf over the past week. Declining coal values in Asia after China took steps to increase supply and reduce speculation take some of the pressure off natural gas demand as well. The above changes don’t fix the energy problem going into the winter, but they ease the stress somewhat.

Unfortunately, we’re still stuck with the limited global supply of fertilizer, and the resulting high prices. That in turn will impact 2022 global crop production, possibly stretching into 2023 as well. That fact has contributed to the corn market trying to carve out a harvest low while supporting stronger than normal cash basis in the country. Most fund managers do not yet comprehend the implications of high input costs on farmer production decisions. To be honest, there’s still a lot of uncertainty how things will play out. Producers in the core of the Midwest do not like to vary much from their established crop rotations – at least that’s been their tendency over the past decade. But that’s assuming that they can access the inputs needed. At greatest risk are nitrogen, phosphate, and potash fertilizers, as well as glyphosate herbicide. The fertilizer situation risks a shift toward soybeans, wheat, and cotton, while the glyphosate issue – if it unfolds as some fear – creates problems for soybeans as well.

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Perspective: Morning Commentary for August 12

August 12 – Today’s focus is on inflation, with the July consumer price index data out this morning. We have this, and one more month of data, ahead of the next Federal Reserve meeting. Of course, headlines from the Middle East and the Black Sea wars also have an ongoing influence on the markets. Stock futures posted gains this morning, while the VIX traded just below 15. The dollar index traded near 99.7. Yields on 10-year Treasuries are trading near 4.66%, while yields on 2-year Treasuries are trading near 4.18%. WTI crude oil is trading near $83, while Brent trades near $88 per barrel. The grain and oilseed markets rebounded from yesterday’s losses ahead of today’s highly anticipated WASDE crop report that is due out at Noon Eastern Time.

Arlan SudermanWed, 12 Aug 2026, 13:33

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Perspective: Morning Commentary for August 11

August 11 – It was generally a quiet night for the markets until early this morning when a headline hit that Iran and Oman were close to reaching a deal. Stock futures rallied, while the dollar index followed Treasury yields lower, along with active selling in the energy- and food-based commodities. The headline had limited impact though in a world that has become skeptical of promises of peace. Stock futures remain steady to firmer at this hour, while the VIX trades near 16 – just above 2026 lows. The dollar index is trading near 99.8 this morning, after recovering from its early morning selloff over the following hour of trade. Yields on 10-year Treasuries are trading near 4.69%, while yields on 2-year Treasuries trade near 4.22%. WTI crude oil is trading near $82 per barrel at this hour, while Brent trades near $88. The grain and oilseed markets are mostly weaker, after failing to recover from this morning’s early selloff that started in the crude oil market.

Arlan SudermanTue, 11 Aug 2026, 13:21

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Perspective: Mid-Day Commentary for August 10

August 10 - Stocks traded quietly mixed to weaker through much of the morning as investors weigh Middle East war / peace headlines with artificial intelligence concerns / opportunities. Ironically, the VIX is trading near 15, putting it just barely above 2026 lows, despite the high level of geopolitical risks and AI concerns. The dollar index continues to consolidate largely between 99.5 and 100.0 after the late July break in what appeared to be Japanese central bank currency intervention. Yields on 10-year Treasuries are trading near 4.70%, while yields on 2-year Treasuries are trading near 4.24%. WTI crude oil is trading near $81 at this hour, while Brent trades near $87 per barrel on the geopolitical risks. The grain and oilseed markets are mixed ahead of Wednesday's big USDA WASDE crop report.

Arlan SudermanMon, 10 Aug 2026, 17:02

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