Perspective: Mid-Day Commentary for September 29

By: Arlan Suderman, Chief Commodities Economist

Wed, 29 Sep 2021, 16:53

Perspective: Midday Commentary

Arlan Suderman

Chief Commodities Economist

September 29 - Stocks pushed modestly higher today, after Democrats shifted their focus to keeping the government open on Friday, diffusing one of the potential concerns on the mind of traders. The VIX is trading near 23 at midday, reflecting ongoing low levels of anxiety on Wall Street. The dollar index surged to 94.3 at midday, which is its highest level since November 4th of last year. Yields on 10-year Treasuries pulled back to trade near 1.52% currently, but the dollar index is still trying to catch those higher yields as foreign money seeks to participate in the U.S. markets. Yet, I'm still impressed with the commodities today, battling higher against the dollar's headwinds. Crude oil erased early losses to trade mixed at midday, while the Ags were mixed to higher as well.

State Street's investor confidence index fell 4 points to 105.9 for September. A reading above 100 still reflects overall confidence by investors, but that confidence eroded somewhat this month. The index fell the most in Europe, but also saw modest declines in Asia and in North America as well. the Delta variant continues to get the blame for declining economic growth prospects, but people are soon going to grow wary of hearing that blamed for everything, especially in the United States where national Covid numbers have been in decline through September. I believe one of the stories of this week is that the risk of inflation to the economy is becoming more apparent, which has been a significant factor in the markets.

Lean hog futures gave way to profit taking following a couple of days of solid gains on Friday's bullishly construed USDA quarterly hogs and pigs report. Feeder cattle prices were under modest pressure today from higher feed costs, while live cattle finally found some strength after the past week's losses, held up by mostly steady to mixed cash cattle prices of $124 in the south and $122 in the northern feedlot belt. The excitement was largely in the grain and oilseed markets. Outside market influences pulled those markets lower on Tuesday. Those concerns eased today, allowing grain and oilseed prices to bounce back. Corn and soybean prices largely bounced back to Monday's levels, while wheat was still working on closing the gap. Traders have their eyes on the outside markets, while also positioning for tomorrow's set of USDA reports.

U.S. crude oil stocks (excluding those in the Strategic Petroleum Reserve) surprisingly increased by 4.6 million to 418.5 million barrels in the week ending September 24. Yet, they remain roughly 7% below the five-year average for late September. Gasoline stocks rose by 0.2 million barrels during the week, leaving them 3% below seasonal levels. Distillate stocks grew by 0.4 million barrels, but they remain 12% below levels typically seen at this time of year. Ethanol stocks firmed to 20.2 million barrels in the week ending September 24, up from 20.1 million the previous week and up from 19.7 million in the same week last year. Ethanol production fell to 914K barrels per day last week, down from 926K the previous week, but up from 881K barrels per day in the same week last year. The production of ethanol utilized an estimated 90.5 million bushels of corn last week, bringing estimated corn use to 314 million bushels for the first 24 days of the new marketing year. That's down 22 million from the total used in the first 25 days of the previous year. Gasoline usage is basically back to 2019 levels, but the graphic below shows that weekly ethanol production, while above year-ago levels, still lags behind the five-year average pace.

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