August 26 – It’s been a back-and-forth morning on Wall Street, with stocks trading both sides of unchanged so far today as elation around the Fed’s perceived path lower following Friday’s comments contends with rising geopolitical risks around the world. The Dow Jones touched fresh all-time highs earlier in the session before losing steam but remaining in the green, while the S&P 500 and Nasdaq both hang in the red at the time of writing. The VIX has risen through the morning, trading above 16.5, while the dollar is attempting a slight rebound as it trades near the 100.7 level. Crude oil remains sharply higher on rising Middle East tensions, with the nearby WTI contract hovering near $77.20 after pushing to roughly two-week highs earlier in the session. The ags are mostly lower, save for the soy complex pushing higher and cattle complex continuing to rebound following Friday’s Cattle on Feed report. The market will get plenty more to digest this week, most notably with Nvidia earnings due Wednesday, Q2 GDP on Thursday, then PCE and consumer sentiment capping us off on Friday.
Canada’s Industrial Relations Board over the weekend put an end to a potential extended work stoppage among the country’s Class I railroads, as they upheld the government’s order for the two sides to enter binding arbitration. Virtually all rail shipments on the country’s two largest railroads, the CN and CPKC, were stopped last Thursday when the initial strike was announced but will now begin moving again despite the ongoing lack of an agreement between said railroads and the TCRC, the union representing more than 9,000 rail employees. The railroads did warn that it could take several weeks for their networks to return to normal after the brief stoppage, especially with shipments of “toxic materials,” including the important fertilizer feedstock ammonia, being halted well in advance of the potential strike. While disruptions to Canada’s railroads have a very wide-ranging impact on both the Canadian and U.S. economies, the U.S. ag industry is very directly impacted because of the close ties. From an input perspective, Canada is by far the top supplier of potash to the U.S. (and the rest of the world), but the current situation of plentiful supply alleviates too many concerns on that front. Perhaps more impactful in the near-term is the disruption to ammonia shipments, with Canada now being the top ammonia supplier to the U.S. due to ongoing gas supply issues in traditional top supplier, Trinidad & Tobago. Those issues have led to much larger demand for U.S. ammonia exports, especially with Russia still largely absent from the global market, leading to further tightening of domestic supply ahead of the upcoming fall application season.
The Dallas Fed Manufacturing Index rose in August to a reading of -9.7; this may sound bad because it is solidly in contractionary territory, but it’s actually a sharp improvement from the -17.5 in the month prior and the best reading for the index since January 2023 as the U.S. manufacturing sector continues to show signs of life. The production and shipments portions of the index both broke into narrowly positive territory in August, though the employment portion of the index did fall back into slight contraction at -0.7 after. the surprise 10-month high seen in July at 7.1. This could come into more spotlight as the Fed’s attentions shifts towards the U.S. labor market due to the recent signs of cooling. We’ll get more manufacturing data from the Richmond Fed tomorrow, but overall expectations are to see a gradual improvement from the month prior.
The USDA inspected 35.2 million bushels (mbu) of corn, 15.1 mbu of soybeans, 4.5 mbu of milo, and 19.7 mbu of wheat in the week ending 8/22. This was near the lower end of expectations for corn, marking the lowest weekly shipments since late June, but toward the high end of the range for both soybeans and wheat. In fact, these were the highest weekly soybean export inspections seen since early May, helping provide support as soybeans trade slightly in the green at mid-day.
