Perspective: Mid-Day Commentary for September 30

By: Arlan Suderman, Chief Commodities Economist

Thu, 30 Sep 2021, 16:39

Perspective: Midday Commentary

Arlan Suderman

Chief Commodities Economist

September 30 - It's the end of the month and end of the fiscal quarter, leading to some erratic trade at times, but Wall Street is also closely following developments in Washington, D.C. It appears that Congress will pass a bill today to fund the government through December 3rd, although the vote has not yet occurred. It will then deal with other high-impact issues, such as the infrastructure bill, social spending bill and debt ceiling. They're all related and they all have implications for the economy, and therefore the markets. Stocks turned lower late morning as hopes for passage of the infrastructure bill in the House started to wane, following comments from the top two leaders in the House. The VIX rose to trade near 25 at midday. The dollar index is trading near 94.4, while yields on 10-year Treasuries are trading near 1.51%. Those two numbers tell us that inflation is a focus on Wall Street, and demand for dollars remains strong to participate in the U.S. securities markets. Crude oil prices are near 1% higher, while the Ags are responding to this morning's USDA quarterly stocks and small grains summary reports that were released at Noon EDT.

USDA didn't fail to surprise with today's numbers. Our estimates were very close to its corn and wheat stocks estimates, but missed the soybean stocks estimate. September 1 corn stocks came in at 1.236 billion bushels, reflecting a late-year decline in exports and ethanol production, along with a bit weaker feed demand than the trade anticipated. That will cool demand estimates a bit for the 2021-22 marketing year as well, although the market has thus far taken the news in stride. That may be because concerns are rising that rapidly escalating fertilizer costs will curb corn acreage in 2022, helping to keep stocks relatively snug. USDA also cut the size of last year's corn crop by 71 million bushels to help make the balance sheet work, while also confirming lower demand rates. It cut last year's planted acreage to 90.7 million for last year's corn crop, while lowering the yield to 171.4 bushels per acre.

The real surprise came in the soybean stocks estimate, where demand is largely know via either exports or crush. USDA raised the size of last year's crop by 80.8 million bushels - a sizeable late adjustment. It raised last year's planted acreage to 83.4 million acres and the yield to 51.0 bushels per acre. This creates more of a concern for soybean bulls in the market, who are also hearing of much better-than-expected soybean yields this year.

USDA adjusted its all wheat production estimate downward by 51 million bushels, with hard red winter losing 28 million, other spring losing 12 million and white winter losing 9 million from the August estimate. This piles on top of recent declines in output from Canada and Russia. Supplies of quality milling wheat are tight in the world, and today's numbers reinforce that fact. Sinking corn and soybean prices cooled gains in wheat, but they rose nonetheless.

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