Perspective: Mid-Day Commentary for January 4

By: Arlan Suderman, Chief Commodities Economist

Tue, 04 Jan 2022, 18:15

Perspective: Midday Commentary

Arlan Suderman

Chief Commodities Economist

January 4 - Stocks are going in opposite directions at midday. The Dow shows solid gains on expectations of a strong economy in 2022, while surging yields on Treasuries produced active selling in the tech sector. We're seeing a lot of beginning-of-the-year positioning of money flow this week. In addition to the above, that's also producing positive money flow into the commodities, although certain sectors are more favored, like what we're seeing in the equities. Investors are being choosy, based on the factors that they expect to be dominant in the year ahead. The dollar index came into the year with a weaker bias, but increased foreign demand for greenbacks stabilized it as Treasury yields began to pop. The VIX continues to trade near 17, reflecting a lack of fear as all of this takes place on Wall Street. The dollar index is trading near 96.2, even as yields on 10-year Treasuries rise to a nearly six-week high at 1.68%. Crude oil prices are 1% higher as money flows into the commodities on economic optimism and as a hedge against inflation. The Ags are mixed to higher as well. Gains in the grain and oilseeds are strong, while the protein complex winces at the higher feed costs. Chart signals are being turned, with momentum traders amplifying the move.

Soymeal initially drove the soybean complex Monday, but it has shifted to soyoil today, combined with higher energy prices and higher canola prices. U.S. processors have ample oil supplies currently, for the most part, but adverse weather leaves Argentine production at risk at a time when demand is rising for feedstock to produce the new renewable diesel fuels, as well as sustainable aviation fuels. The primary focus is on the return to a hot dry forecast for much of Argentina, Paraguay and southern Brazil, particularly after yesterday's shocking drop in production from our StoneX Brazil team that slashed the size of its soybean crop by 11 million to 134 million metric tons. March soybeans traded to their highest levels for the contract since July as prices followed the upward momentum. Not to be outdone, corn prices surged as well. StoneX Brazil cut its total production estimate by 2.5 mmt to 117.5 mmt, but the greater concern presently is the Argentine corn crop. Most of Brazil's corn production comes from its winter crop, which typically gets planted next month. Wheat prices are reluctant followers. Minneapolis wheat is the weakest, as it tests support at the 100-day moving average. However, the winter wheat markets posted double-digit gains following the release of crop ratings Monday afternoon from select states showing a massive decline in ratings for areas of the Central Plains impacted by last month's drought and high winds.

It's been dry in the Plains hard red winter wheat belt, with 78% of the region seeing less than 50% of normal precipitation since November 1st, and 52% receiving less than 25% of normal precipitation during the period, as shown below. That's makes the period the second driest of the past forty plus years. Furthermore, the forecast continues to look dry for the foreseeable future. The Kansas crop is rated 33% Good to Excellent, down 25 points since December 12th. Oklahoma's crop is rated 20% G/E, down 28 points since last month. Colorado is at 25% G/E, down 13 points, while Nebraska is at 39% G/E, down 25 points on the month. These states accounted for 46% of last year's winter wheat production.

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Perspective: Mid-Day Commentary for August 7

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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.

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