Perspective: Morning Commentary for October 25

By: Arlan Suderman, Chief Commodities Economist

Mon, 25 Oct 2021, 13:34

Perspective: Morning Commentary

Arlan Suderman

Chief Commodities Economist

October 25 – Positive money flow supported both the equities and the commodities overnight, as traders assess strong earnings with expectations that this week’s data may show slower tech earnings, slowing economic growth and rising inflation expectations. The VIX continues to trade near 16 to start the week, reflecting relative complacency on Wall Street. The dollar is firming to trade near 93.8, while yields on 10-year Treasuries are trading near 1.65%. Crude oil prices pushed to fresh seven-year highs this morning, while the Ags were mostly higher as well. Several key data points could influence this week’s money flow, in addition to tech earnings reports. PCE price data is scheduled for release on Friday, providing the latest inflation data that the Fed focuses on in its discussions. This data registered a 30-year high 4.3% annualized inflation rate last month. We’ll also hear monetary policy updates from the Bank of Canada on Wednesday and from the European Central Bank and the Bank of Japan on Thursday, which could impact many of the markets.

The Chicago Fed national activity index is a composite of 85 monthly indicators constructed to have a value of zero when the economy is growing at a trend rate, with a standard deviation of one. The index for September fell below zero to -0.13, down from 0.29 in August. That drops the three-month moving average to 0.25, down from 0.43 in August. Rising inflation is impacting consumers, along with supply chain disruptions. As a result, we are seeing a slowdown in the growth of the economy. We should get our first reading on third quarter gross domestic product on Thursday. Analysts expect the data to show that GDP grew at a 2.7% annualized rate in the third quarter, down from 6.7% in the previous quarter.

China reported 35 new Covid cases today, bringing the total from this latest outbreak to 157 cases spread across 11 provinces. Most notably, two of the new cases reported were in Beijing, triggering new travel restrictions for people wishing to enter the city. China’s zero-tolerance Covid policy continues to result in significant quarantines and lockdowns for anyone who may have come into contact with these individuals via electronic tracing. China has successfully squashed each previous outbreak over the past year, so there’s a sense that it will be successful this time as well. However, the scope of this outbreak covering 11 provinces makes it more challenging. There are economic consequences to the lockdowns, and they will do nothing to ease supply chain disruptions related to China. At least this round of cases is not directly related to any of China’s major ports through which commodities and products are traveling, as the cases are focused primarily on more rural areas of the country.

The U.S. Centers for Disease Control reports that the seven-day moving average for positive Covid-19 tests fell to 70,153 on Friday, the latest date for which data was available this morning. That’s essentially a three-month low after the average peaked over 160K in August. The seven-day average for Covid-related deaths is at a two-month low just above 1,200. The numbers continue to move in the right direction. Covid should not be a significant factor in the economy, or in demand for commodities, in the weeks ahead.

The commodities found fresh buying interest overnight, led by the Energies, but the Ags found good strength as well. We’ve seen recent days when that overnight strength in the Ags was sold at the open, and that may be the case today as well, but at least harvest pressure should ease now following heavy rains over the weekend. The weather has cooled dramatically, and the fields will be slower to dry following this latest round of rains. Farmers are focused on rising input costs, which means they are reluctant sellers overall.

Ag commodity prices were generally higher in China overnight. Hog futures were again limit higher, with corn prices up notably as well. China’s wheat auction saw a strong response last week, reflecting expectations of higher prices down the road. We should note that cash corn prices have been much slower to respond amid the current harvest, with supplies generally adequate to meet demand as the new crop hits the market, and overall demand remaining soft. The hog to corn price ratio rose to 5.9 today, up from 3.8 at the first of the month, although still not at very profitable levels. The next two quarters are still expected to be challenging for China’s hog industry, although the worse may now be behind them. U.S. corn and soybean futures markets are slowly starting to focus on high input costs and supply concerns that could impact next year’s acreage mix. We could also see outside market influence in the Ag markets this week as we hear from central banks as stated above, as well as get economic data.

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Perspective: Mid-Day Commentary for August 7

August 7 – Stocks are looking to end a strong week on a strong note, with the major indexes all in the green at the time of writing. The VIX touched a nearly seven-month low earlier in the session and remains muted as it hovers just below the 15-mark as this morning’s ugly labor market data helps ease hawkish Fed jitters. The dollar has rebounded from its nearly two-month low earlier in the session but remains in the red on the day, trading at 99.55 at the time of writing. Treasuries have had a very volatile day, with yields tanking following this morning’s Non-Farm Payrolls release but bouncing back into midday, with 30-year yields now trading at 5.209%, 10-year yields trading at 4.654%, and 2-year yields trading at 4.204%. Crude oil has risen from the morning lows as traders eye the weekend market closure for potential geopolitical developments, with nearby WTI now down only 0.2% on the day to trade around $78.10 and nearby Brent breaking into the green, up 1.25% on the day to trade above $83.50. The ags are largely mixed, with the grains and oilseeds mostly in the green, save for a mixed picture in the soy complex, while live and feeder cattle futures move in opposite directions, with the former adding to yesterday’s sharp losses and the latter attempting a rebound.

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Perspective: Morning Commentary for August 7

August 7 – The U.S. economy unexpectedly lost 23k jobs in July, dramatically below market expectations of an 80k increase and marking the worst Non-Farm Payrolls print since February. Furthermore, May and June were both revised sharply downward, with combined revisions showing 103k fewer jobs than previously reported. Outside of the healthcare sector, which added 22k jobs in July, the losses were very broad-based. Government payrolls saw the largest decline, shedding 53k jobs in July, the largest seen since October 2025, while June was revised down to show a loss of 10k jobs as well. The private sector at least saw growth, adding 30k jobs in July, now matching the month prior after it was revised down from the 49k initially reported, and substantially missing forecasts of 78k jobs being added. This is a sharp reversal in course from the largely better than expected U.S. labor data seen earlier this week.

Mike CastleFri, 07 Aug 2026, 13:26

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