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Perspective: Morning Commentary for September 18

By: Arlan Suderman, Chief Commodities Economist

Perspective: Morning Commentary
 
Arlan Suderman
Chief Commodities Economist
 

Guest Commentary by Matt Zeller, Senior Market Intelligence Analyst

September 18 – Dow Jones Industrials remain range-bound in general but futures are inching higher this morning ahead of the Federal Open Market Committee September meeting today and tomorrow. Wall Street is hoping we’re at the peak of the interest rate increases and that the Fed will start to pivot without losing its grip on inflation; trade estimates are at 99% (almost unanimous) that rates remain unchanged upon the conclusion of the meeting tomorrow afternoon. More importantly, the trade still does see a 31% chance of another rate hike at the next policy meeting in November. Actual government data from last week doesn’t support the equities market optimism – higher-than-expected prints came in for both the CPI and PPI data last week, suggesting inflation has yet to be completely “tamed”, and the Fed will likely continue to tread carefully as to not repeat past mistakes.

 

Jeep maker Stellantis on Saturday said they’d offer a 21% pay increase to its union workers over the course of the contracts, including an immediate 10% pay raise; that’s in line with proposals from Ford and General Motors to the UAW. However, the United Auto Workers are seeking a 40% hourly pay raise and a reduced 32-hour work week along with other demands. The major auto companies have all picked up talks with union officials by today, but the market will be watching for progress in the coming week or so, or the threat of further strike activities could increase.

 

WTI crude oil values are rallying again to open the week, up around another buck per barrel today after prices surged easily past the $90/bbl mark Friday; WTI has added over $20/bbl since the end of June and are approaching their highest levels in a year. U.S. crude oil stocks did rebound in last week’s DOE summary but that comes after a long period of declines, with inventories near the bottom of recent year’s range at this point in the season. Saudi Arabia and Russia are sticking with voluntary supply cuts from earlier this month, but if prices continue to rally towards that magic $100/bbl level it will stimulate output, both domestically in shale oil production and globally.

 

Graphics below are courtesy of our lead forecaster Commodity Weather Group over the weekend; they see no real retreat in the normal to above-normal temperature pattern as we head into August, with dry conditions aiding early harvest activities this week but good rains ahead for the western and central belt (mostly this weekend into the 6-10 day time frame early next week) to slow the campaign. Those rains could aid late soybean filling in some areas and shouldn’t put a dent in the harvest campaign long-term, with 11-15 day maps moving those rains back out to the west. The trade will look for anecdotal yield reports in the meantime, but harvest pressure lingers to start this week with demand problems across the board equally problematic for the bulls, if not more so.

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