Perspective: Mid-Day Commentary for June 29

By: Arlan Suderman, Chief Commodities Economist

Wed, 29 Jun 2022, 16:32

Perspective: Midday Commentary

Arlan Suderman

Chief Commodities Economist

June 29 - Stocks are mixed today as traders digest the latest comments from Federal Reserve Chair Jerome Powell, who spoke at a conference sponsored by the European Central Bank. Powell made it clear that fighting inflation is the Fed's top priority right now, as it should have been more 15 months ago. He believes the economy is still strong enough to handle monetary tightening measures necessary to bring inflation under control, with inflation being the greater risk to the economy longer-term. Yet, Powell again acknowledged that a "soft landing" for the economy is becoming "significantly more challenging" the longer that inflation lasts. Powell stated that one of their greater concerns is that a higher level of inflation would become engrained into expectations for the economy, which policymakers are now determined not to allow to happen.

Powell's comments again ratcheted up expectations on Wall Street on the anticipated aggressiveness of the central bank in tackling inflation in future meetings, raising fears about the potential damage that the economy may experience as a result of the medicine being dosed out to tame the ultimate problem of inflation. The VIX traded near 29 as we approached midday, reflecting slowly rising fears on Wall Street. The dollar firmed to trade near 104.9, even as yields on 10-year Treasuries fell to 3.10%, as money gradually shifted toward the safe-haven assets. The commodity sector started the day strong on an inflation trade, but it largely struggled to sustain that strength as worries about demand destruction began to take over. Crude oil prices were mixed at midday, while grain and oilseed prices were mixed to weaker ahead of tomorrow's highly-anticipated USDA quarterly stocks and planted acreage reports.

Soybean prices again posted double-digit gains at times amid talk of Chinese buying and chatter of tightening cash stocks, while corn and wheat struggled to sustain yesterday's gains ahead of tomorrow's reports. These quarterly USDA reports are known for their market-moving surprises. That has traders nervous. It's also the end of the fiscal quarter, when many fund managers want to show profits on their books. It's first notice day on expiring contracts tomorrow, leading to a lot of rolling and spread trading today. Finally, we're approaching the three-day Fourth of July holiday weekend, when weather models tend to set the tone for the corn pollination period. Traders are nervous as a bunch of long-tailed cats in a room full of rocking chairs.

Heat and dryness remain a risk factor for corn pollination this year, as outlined in yesterday's commentary. But the outlook is generally favorable between now and then, as shown in today's graphic. This graphic shows the odds of any specific location receiving at lest 1.0" or more of rainfall over the next 10 days. Keep in mind that an inch of rain is not enough to offset evapotranspiration in most areas at this time of year, but it can still help a crop keep going, and in some cases rain amounts will exceed that inch level. Note also that the bulk of the Southern Plains are expected to remain quite dry over the coming 10 days. This is the area at greatest risk of seeing expanding drought condition in the coming days and weeks. That's something concerning cotton traders.

Odds of rain exceeding 1.0" over the next 10 days. SOURCE: ECMWF, WeatherBell, & Nutrien

Grains & Oilseeds

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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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