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Perspective: Mid-Day Commentary for June 30

By: Arlan Suderman, Chief Commodities Economist

Perspective: Midday Commentary
 
Arlan Suderman
Chief Commodities Economist

 

June 30 - Stocks tumbled on this morning's data showing consumers pulling back on spending as inflation remains strong. Traders remember yesterday's comments from Federal Reserve Chair Jerome Powell stating that the central bank will not allow the economy to slip into a "higher inflation regime." That raised more fears of aggressive tightening from the Fed. Wall Street also has its eyes on another landmark Supreme Court decision limiting federal power of the Environmental Protection Agency to curb carbon emissions without action by Congress, undermining the Biden Administration's war on fossil fuels. That could eventually lift much of the regulatory burden from the economy as it has potential far-reaching implications for other regulatory agencies as well. The VIX continues to trade near 29 midday, reflecting elevated fear levels regarding the economy, while the dollar index pulled back to trade near 104.8. Yields on 10-year Treasuries are trading near 2.98%. Crude oil prices are down roughly 3%. The Ags were pulled lower by the month-end dismal trade as well ahead of this morning's pair of USDA reports, with the data from those reports now influencing action.

 

USDA dropped its planted soybean acreage by 2.6 million to 88.325 million acres. This was the largest surprise of today's report, dramatically changing the new-crop soybean outlook. That knocks more than 150 million bushels off next year's projected production as we head into the critical part of the summer. USDA raised its corn acreage estimate modestly as the trade expected, and contrary to my expectations. Basically, the industry assumed that USDA's March corn acreage estimate was on the low end of the statistical survey error range, and it was correct. We know that many acres did not get planted that were intended, but basically USDA was too low with its March estimate. That said, USDA also said that it will be resurveying farmers in Minnesota and in the Dakotas, where the biggest loss in acres occurred, because the survey was conducted prior to farmers making those final decisions on planting. As such, we could still see the corn and spring wheat number drop again. That could also bring the soybean number up very modestly. Today's quarterly grain stocks report was about as neutral as I've ever seen, which leaves the focus on the acreage, and weather over the next 30 to 60 days. Today's markets also are very much being impacted by the broader selloff in the outside markets as worries about a deteriorating economy raise fears of declining demand for commodities. Keep in mind that we're also dealing with end-of-the-month and end-of-the-quarter positioning in these markets, with a three-day holiday weekend approaching.

 

USDA June 1 Survey Results2022-23
 CornSoybeansAll WheatWinter WheatOther SpringDurum
 millions of acres
USDA Survey Results89.92188.32547.09234.00611.1101.976
    Pre-Report Estimates      
Average Trade Estimate89.86190.44647.01734.30310.8441.839
Highest Trade Estimate91.00092.37548.00035.00011.5002.000
Lowest Trade Estimate88.40088.73546.24034.20010.4001.700
USDA - March 3189.49090.95547.35134.23611.2001.915
       
StoneX88.40091.40046.42034.23010.4001.790

 

Quarterly StocksWheatCorn Soybeans
 billions of bushels
USDA June 1 Estimates0.6604.3460.971
    Pre-Report Estimates   
Average Trade Estimate0.6554.3430.965
Highest Trade Estimate0.6754.4741.100
Lowest Trade Estimate0.6354.0950.740
USDA Previous Year0.8454.1110.769
    
INTL FCStone0.6534.3130.970

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