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Perspective: Mid-Day Commentary for September 6

By: Arlan Suderman, Chief Commodities Economist

Perspective: Midday Commentary
 
Arlan Suderman
Chief Commodities Economist

 

September 6 - Early gains in stocks eroded as the day progressed, and as traders fretted about the future of the economy amid the ongoing war in Ukraine, Covid restrictions in China, high inflation over much of the world, and the impact of monetary policy trying to control inflation. The VIX traded either side of 26 this morning, reflecting elevated levels of fear on Wall Street, but with no sense of panic currently. The dollar index rallied to a fresh 20-year high approaching 110.6 in this morning's trade, creating headwinds for the commodities, as well as renewed challenges for emerging economies with large amounts of dollar-denominated debt. Yields on 10-year Treasuries rose to a fresh 11-week high of 3.35%, with yields on 2-year Treasuries trading near 3.51%. The inverse spread between these two continues to narrow at a rapid pace. Crude oil prices are mixed at midday, while the Ags were mostly mixed to higher.

 

Soybeans continue to get the short end of spreading with corn, with the momentum-trading Algos adding to the selling pressure for the oilseed complex. USDA is expected to lower its corn yield on Monday, while soybeans are expected to hold closer to trend levels for at least one more report. Argentina's policy to give 200 pesos to the dollar for farmers selling soybeans gives added reason for the funds to sell soybeans in their mind, even though those sales will impact product prices more than whole soybeans. The Argentine policy speaks to how low the real market value of the peso is currently, with other sectors expected to pressure the government to follow suite. The first day of the new policy saw one million metric tons of soybeans move. Wheat prices are largely bound by the range that they've traded for most of the past two months, while corn prices are still trending higher on tightening supplies, despite last week's weakness.

 

The 2021-22 corn marketing year ended on August 31. It will take some weeks before we get final Census export data and final corn grind data, but my current balance sheet for both old- and new-crop is below, using our latest StoneX customer survey yield estimate of 173.2 bushels per acre. Note that stocks are declining year-on-year, and the potential is there for them to decline further, depending on how this crop finishes. It's a far different story for soybeans, which look to see rising stocks if current projections hold.

 

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