Perspective: Mid-Day Commentary for November 22

By: Arlan Suderman, Chief Commodities Economist

Fri, 22 Nov 2024, 17:54

Perspective: Mid-Day Commentary

Arlan Suderman

Chief Commodities Economist

November 22 - Stocks rallied on solid PMI data this morning, showing that economic growth is accelerating in the fourth quarter. A modest reduction in service sector payroll was partially offset by gains in manufacturing employment. The VIX is trading near 16 at midday, while the dollar index is trading notably higher near 107.5, after the euro dropped to fresh two-year lows versus the dollar. Yields on 10-year Treasuries are trading near 4.41%, while yields on 2-year Treasuries are trading near 4.37%, as the curve flattens somewhat today. Crude oil prices are more than 1% higher in follow-through buying ahead of the weekend, while the grain and oilseed markets are mixed. Wheat prices pulled back from recent gains, with the strong dollar adding headwinds. Soybean prices bounced following recent losses. Corn prices were largely mixed in quiet trade, as they remain caught between soybean and wheat price movement. Trade volume is expected to slow next week as we enter the holiday malaise period. The protein sector was mostly in the green at midday amid solid domestic consumer buying to offset the challenges to exports from the strong dollar.

The final consumer sentiment index slipped a bit from the initial flash estimate to 71.8, down from the 73.0 originally reported, but still up from 70.5 the previous month, and up 17% from 61.3 the previous year. The current economic conditions index slipped to 63.9 this month, down from 64.9 in October, and down from 68.3 a year ago. The index of consumer expectations that looks into the future rose to 76.9 as consumers show more optimism about where we're going. That's up from 74.1 in October, and more than 35% above the 56.8 seen a year ago. As expected, the index surged for Republican consumers who were surveyed, while falling notably for Democrats. Year-ahead inflation expectations slipped slightly to 2.6%, which is the lowest reading since December 2020. Long-run inflation expectations rose 0.2 points to 3.2%.

Today's chart, seen below, comes from the category of "what's up with this" department. The chart shows USDA data on annual world corn exports and imports. In theory, exports and imports should equal one another, with a little slippage possible. There could be some aberrations when a surge of exports at the end of the marketing year are received early in the new marketing year, but overall, we should see exports and imports equal each other. For soybeans, that's basically the case. For wheat, exports generally exceed imports, but not to the extent seen with corn, as shown below. World exports over the past 15 years total 91.367 billion bushels. World imports over the same time period total 87.861 billion bushels. That means that we've fed the fish of the ocean some 3.5 billion bushels of corn over the past 15 years! That represents roughly 4% slippage, that according to USDA, was shipped and never arrived to be counted as an import. As you can see on the graphic, there are those years where imports exceed exports, but the overwhelming trend is that we ship more corn than we receive in the world, and it's more true of corn than it is the other major commodities. What do you do with this information? Not a lot. It makes for some frustration in trying to develop balance sheets, but it also makes for some good conversation.

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