By: Craig Turner, Senior Risk Management Consultant
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MACRO MARKETS | Global markets are all higher, and the USD is lower, as traders now expect central banks to ease up on interest rate hikes. The Reserve Bank of Australia raised interest rates by 25 basis points and the market expected 50. Inflation is expected to slow in the next CPI report and that might allow the Federal Reserve to increase rates by 25 or 50 basis points instead of 50 to 75. Crude oil is also helping the rally after reports surfaced that OPEC may cut production by 1 million barrels a day. Dec Crude is now over $85 and supportive for biofuels and ethanol. GRAINS & OILSEED | We are hearing that the canola crop may be a smaller than current official estimates. The crop could be 18 MMT instead of 19.5 to 20 MMT. The later planted crop did not develop as hoped and while there will be a crop this year, it may fall short in expectations. If true that means the market may have to price ration an additional 1 MMT in the export market. Nov Canola has major resistance in the 890 to 900 level and we are testing that today. StoneX kicks off the next round of private analyst yield projections later this afternoon. Many traders are looking for corn to be around 170 and soybeans 51. Lower corn yields will keep stocks tight for at least another six months until we have a better idea of Arg/Brazil corn production. Ukraine's Ag Ministry reported only 1.1 million hectares of winter wheat have been planted. This time last year it was 3.1 million. Analysts now expect only half of the winter wheat will be planted in Ukraine. If true the major grain markets (corn and wheat) could be tight for another year. StoneX Brazil raised their 2022/23 soybean production 200K tonnes to 153.8 MMT. Corn is estimates at 126.3 MMT. That is a lot of corn and soybeans. Brazil will plant record acres and seeding is off to a good start. Grains look to be tighter longer than oilseeds for the 2022/23 marketing year. Given a decent crop in S. America this winter, we should see global stock go back to adequate levels in the spring of 2023. Grains may not get back to adequate stocks levels until the 2023/24 marketing year.
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A strong super El Niño has started, but the crop damage that would lift food prices is still expected to land between September and December. Indian wheat area and Southeast Asian palm oil production sit at the front of the transmission chain, with Brazil the larger unresolved question.
Damage to Black Sea ports has stalled grain exports, but the more serious risk is now forming on the farm. Collapsed farmgate prices and a Russian fuel crisis have put part of the wheat harvest in question.
August 13 – The major stock indices traded quietly mixed overnight ahead of this morning’s weekly job numbers and producer price index data. Like Wednesday, this morning’s data was considered good as well, providing support for stocks while generally allowing Treasury yields to slip a bit lower. The VIX is trading near 14.4, which is just above yesterday’s new low for the year. The dollar index is trading near 99.8. Yields on 10-year Treasuries are trading near 4.64%, while yields on 2-year Treasuries are trading near 4.15%. WTI crude oil is trading near $81 per barrel, while Brent trades near $87 per barrel. Wheat prices again firmed overnight on geopolitical risks in the Black Sea Region, while corn and soybean prices pulled back modestly from yesterday’s big gains.
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