By: Mike Castle, Market Intelligence - Fertilizer Analyst
May 1 – Wall Street is looking to end a strong week on a strong note, with the major indexes all in the green at the time of writing, including fresh record highs being made yet again in both the Nasdaq and S&P 500. The VIX remains quietly in the red on the day, hovering around 16.8 after dipping to a nearly three-month low at 16.44 earlier in the session. The dollar has rebounded a bit from this morning but remains slightly in the red, trading at 97.97 at the time of writing. Treasuries have softened a bit through the session, with 10-year yields now trading just above 4.37% and 2-year yields trading below 3.88%. Crude oil has extended losses into midday, with nearby WTI now down over 4% on the day to trade near $101 while nearby Brent is down 2.6% to trade around $107.50. The ags are largely mixed, with much of the grain and oilseeds trading both sides of unchanged thus far, though we are seeing notable strength in both soybean oil and feeder/live cattle futures.
The U.S. manufacturing sector continues to show impressive strength, with S&P Global’s final April Manufacturing PMI rising to 54.5 from the preliminary 54.0 reading earlier this month, marking the strongest expansion in the manufacturing sector since May 2022. We got a second reading this morning as well, with the ISM Manufacturing PMI holding steady at 52.7 in April, matching the level seen in March that represented the strongest expansion in this metric since August 2022, highlighting the same strength. New orders rose notably in both indexes, while output growth in S&P Global’s data accelerated at its fastest pace in four years. There were some potential signs for concern that may be worth keeping an eye on moving forward, however, with both readings showing notable declines in employment within the sector as well as notable increases in both input and selling prices, suggesting potential inflationary pressures ahead.
As we look ahead to the summer growing season in the U.S. amid the shift to El Niño, the most common analogs we continue to hear from the forecasters are 1997 and 2015. We highlighted 1997 in Tuesday’s Mid-Day Commentary, with an in-depth look at the back-and-forth shifts in dryness during that summer, but ultimately cooler temperatures throughout allowing for above-trend yields. 2015 had some notable similarities, though it was in general much wetter, coming in among the wettest summers on record in the Eastern Corn Belt, leading to some severe localized flooding in portions of Indiana, Illinois, and Kentucky, while much of the Plains also saw considerably more moisture than in 1997. What really stands out when looking at the maps, however, is the similarity on the temperature side, with 2015 also being an exceptionally cool summer for much of the Midwest, namely in the Eastern Corn Belt, while the far Northern Plains were slightly warmer than usual. The biggest difference on the temperature side was in the Southeast and PNW, with 2015 being much warmer than usual in both of these areas as opposed to the coolness in 1997. That would track with Commodity Weather Group’s current seasonal outlook calling for above average temperatures in the Southeast and PNW, but well below average temperatures in much of the Midwest, with the furthest below centered in the Eastern Corn Belt.
So, how did these two analogs fare in terms of yield? The graphics below show state-level percentage differences from the previous 30-year simple linear trend yields on both corn and soybeans in 1997 and 2015. As can be expected, there was considerable variability by region, but yields at the national level were above trend across the board. Soybean yields were stronger relative to corn, coming in 6.31% above trend in 1997 (compared to corn’s +0.52%) and 6.76% above trend in 2015 (compared to corn’s +4.18%), primarily due to the more favorable later-season conditions. Obviously, we’re still extremely early in the growing season, with the majority of the nation’s corn and soybeans still yet to go into the ground. While the generally cool, wet conditions in the near-term forecast may look to slow planting progress and early establishment over the next couple weeks, once we move into the heart of the growing season, expectations are quite favorable. As always, I should add the disclaimer that we must take any long-term forecasts with a major grain of salt, as they can shift dramatically as the season progresses, but this is where the models point today.
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China committed to buy 25 million metric tons of US soybeans in the 2026-27 marketing year, but official forecasts and market skepticism suggest the actual figure could be 10 million tons lower. The gap between political commitment and commercial follow-through is now shaping how grain traders read every incoming export sale.
June 18 – The rebound on Wall Street continues at midday, with the Nasdaq up 2.2%, S&P 500 up 1.0%, and Dow Jones up 0.3% at the time of writing. The VIX has fallen in turn, falling back to trade around 16.9 at midday after pushing as high as 18.8 yesterday. The dollar is adding to yesterday's gains, setting a fresh 13-month high around 100.8 earlier in the session and hanging just below that level at the time of writing. Treasuries are mixed on the day, with 10-year yields now just below unchanged as they hover near 4.443% and 2-year yields just above unchanged as they trade at 4.164%. Crude oil is continuing its decline in the wake of the MOU between the U.S. and Iran, with nearby WTI making a fresh low since early March at $74/barrel and nearby Brent doing the same as it trades around $77.85/barrel. That selling pressure continues to spill over to the broader commodity sector, with the ags mostly in the red at midday, save for some small gains in nearby feeder cattle futures.
June 18 – Stock futures pushed higher early this morning as investors weighed prospects for the Strait of Hormuz reopening against a more hawkish Federal Reserve. The VIX remained slightly elevated near 17 this morning, although that is below yesterday’s high near 19. The dollar index however continues to push higher to fresh one-year highs near 100.7. Yields on 10-year Treasuries are trading near 4.45%, while yields on 2-year Treasuries are trading near 4.18%, after pushing to fresh 16-month highs on Wednesday. The yield curve continues to flatten amid rising inflation risks. Yet, WTI crude oil put in a fresh three-month low this morning near $74 per barrel. The grain and oilseed markets tried to push higher overnight, but then they came under pressure in the early morning hours today. The markets are closed for Juneteenth Day tomorrow.
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