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Perspective: Mid-Day Commentary for August 27

By: Mike Castle, Market Intelligence - Fertilizer Analyst

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Guest Commentary by Mike Castle

Senior Commodities Economist

August 27 – Nvidia is trading at a nearly three-month high at midday, with yesterday’s earnings report driving a 9.3% gain, with the rest of the tech sector catching the tailwinds as the Nasdaq (+1.1%) leads the major indexes higher, followed by the S&P 500 (+0.7%), and Dow Jones (+0.3%). The easing nerves regarding the AI trade is also reflected in the cooling VIX, falling to a two-week low as it trades just below 14.5 at midday. The dollar was higher to start the day but is now trading just below unchanged, hovering below 99.1 at the time of writing. Treasuries are seeing a likely welcome quiet session, with 2-year yields falling below 4.22%, 10-year yields falling below 4.66%, and 30-year yields falling to 5.18%. Crude oil is quietly higher again today, with WTI up roughly 1% on the day to trade near $82.70 and nearby Brent up 0.6% to trade near $87.50. The ags remain largely mixed, with corn and soybeans both showing small losses at midday while the wheat complex continues to move higher and the cattle sector attempts to stage a rebound after its recent sharp losses.

Weekly first-time claims for unemployment came in slightly lower than expected at 203k, a drop from the upwardly revised 207k in the week prior and below the average analyst estimate of a slight rise to 208k. The four-week moving average ticked slightly higher to 205.5k, but that was simply a function of a very low 198k from late July being replaced with this week’s 203k, still low in its own right. Providing additional positivity regarding the health of the U.S. labor market, continuing claims slipped to 1.778M, well below the 1.790M estimate, while the week prior was revised down to 1.796M from the 1.799M initially reported. Better-than-expected labor data should lean modestly hawkish for the Fed, with renewed signs of resilience of the labor market acting as something of a permission signal for a hike to battle above target inflation, but the focus of the market in the near-term will likely remain on tomorrow’s comments from Jackson Hole.

The Kansas City Fed’s Composite Manufacturing Index rose to 10 in August, with a notable uptick in new orders and raw material inventories driving the increase. The production portion of the index held steady at 17 in August, down slightly from the four-year high of 19 seen in June but continuing to show robust growth with the seventh consecutive month in expansionary territory, representing the longest streak of expansion seen since 2022. Digging into the details the Fed would care about, the employment side showed a slight easing from the month prior, now back to flat after two consecutive months of expansion, but the real noteworthy takeaway would be the continued acceleration of price pressures, with the indexes for prices paid and received both rising further. This also highlights the ongoing buildup in inflationary pressures at the producer level, with the big question being what the pass through to the consumer level will look like in the year ahead.

Weekly new crop soybean export sales of 91.1 million bushels were the largest next marketing year sales in two years, with China accounting for 40.45 million bushels and Unknown destinations accounting for 38.43 million. Daily reported flash sales since last week’s USDA export sales report totaled just under 70 million bushels, so this morning’s huge print was in line with expectations. Still, this brings cumulative new crop soybean sales to 526.7 million bushels, roughly double this time last year and maintaining a four-year high. That may not look out of line, but it’s important to keep in mind that U.S. soybean crush demand is 2026/27 is currently pegged at 2.78 billion bushels, 568 million more than four years ago, meaning the U.S. has inherently less excess supply for the export market. USDA is currently calling for a record large U.S. soybean crop, but reductions in that expectation could look to further tighten the balance sheet, especially if China continues their purchasing pace.

Weekly wheat export sales of 14.8 million bushels were a nine-week high, supported primarily by a marketing year high in white wheat sales at 8.5 million bushels, mostly to Southeast Asian destinations. Cumulative 2026/27 U.S. wheat export sales have gotten off to an expectedly slow start given the small crop, with the current 303.8 million bushels representing the slowest pace in three years, but the real focus is on what lies ahead. The longer shipments from the Black Sea remain disrupted, the higher the chances of seeing a shift in trade flows that could eventually drive more demand to the U.S. Corn sales were less exciting with a net 1.2 million bushels of old crop and 42.0 million bushels of new crop. We should see another upward revision to USDA’s current 3.40-billion-bushel export target for 2025/26 on next month’s September WASDE, but don’t be surprised if this is taken out of feed and residual demand. The new crop (2026/27) sales pace may be worth keeping a closer eye on, with cumulative sales beginning to fall further behind last year’s pace, but as with the wheat side, the real focus is on what lies ahead, especially in the context of Ukrainian exports potentially staying restricted longer-term and Brazil keeping more corn at home for their booming corn-based ethanol sector.   

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