Perspective: Morning Commentary for March 30

By: Arlan Suderman, Chief Commodities Economist

Thu, 30 Mar 2023, 13:29

Perspective: Morning Commentary

Arlan Suderman

Chief Commodities Economist

March 30 – Stock futures pushed higher as optimism gains a foothold on Wall Street. The VIX traded at a fresh three-week low below 19 this morning, reflecting the growing sense of contentment on Wall Street on expectations that the Federal Reserve will finally “have to” do what traders want it to do – pivot its monetary policy. The dollar index fell notably this morning to trade near 102.2 in early trade. Yields on 10-year Treasuries are trading near 3.57% this morning, while yields on 2-year Treasuries are trading near 4.13%. Crude oil prices are 1% higher, while the grain and oilseed markets are modestly higher as well, with generally positive money flow to start the day in the commodity and equity spaces.

Gross domestic product grew at an annualized rate of 2.6% in the fourth quarter of last year, down from analyst expectations that the pace would remain at 2.7%. This is the third reading of the fourth quarter GDP growth, so there was little fanfare around the numbers. However, personal consumption expenditures grew by just 1.0% in the fourth quarter on an annualized basis, that’s down from 1.4% in the previous reading of the data, and a surprise to analysts. That means that consumer spending grew less than expected in the fourth quarter, reflecting apprehension over the direction of the economy. That, combined with a bit slower GDP growth, continues to fuel Wall Street’s argument that the Fed “must” pivot its policy in the months ahead.

First-time claims for unemployment benefits totaled 198K in the week ending March 25, up from 191K the previous week and up from analyst expectations of 195K. That pushed the four-week moving average to 198.25K claims, up from 196.25K the previous week. Continuing claims for the week ending March 18 rose 4K to 1.689 million. That number is still relatively low from a historical standpoint, but it is slowly trending higher. Nonetheless, these numbers still suggest that we have a very tight jobs market, which continues to feed wage inflation.

China has drawn a line in the sand – there is to be no diplomatic contact between leaders in Taiwan and leaders in the United States. Any time that such contact happens, and it does, consequences are doled out by the Chinese government. Sometimes those consequences are targeted at Taiwan; sometimes at the United States; and sometimes at both. As such, tensions are mounting once again between China and the United States as Taiwanese President Tsai Ing-wen continues with her trip to Central America. She is expected to have a stopover in California on her way back to Taiwan, at which time she is expected to meet with U.S. House Speaker Kevin McCarthy. China warns of a “serious confrontation” if the meeting takes place. McCarthy had previously spoken of a desire to visit Taiwan, but this meeting may replace that. Like the August Pelosi visit, McCarthy cannot now be seen as backing down to the Chinese government, but China has also put itself in a position of being unable to back down from its threats. As such, the world now waits to see how the consequences unfold.

China has been washing out previous purchases of Argentine soybeans, according to our cash sources in China, replacing them with U.S. soybeans. China doesn’t need the soybeans near-term, so they are likely destined for its reserves. Declining inclusion rates of soymeal in rations combined with lower pig numbers continue to soften demand for soymeal. We should be seeing crush around 2.1 million metric tons per week in China now, but instead crush fell to 1.39 mmt last week, down from 1.42 mmt the previous week. Yet, soymeal inventories rose 10% week-on-week to 567K metric tons, which is only slightly below the five-year average for the week. An industry survey showed processors using just 56.9% of the country’s crush capacity last week. This suggests that corn feed demand will remain under pressure as well as we head into the summer, yet China continues to buy corn on nearly a daily basis, suggesting that both corn and soybean reserves are being rebuilt with these purchases.

The dominoes continue to fall in the Russian grain trading business, as more foreign companies pull out under pressure from President Putin’s regime. Blomberg reports that Louis Dreyfus will be the next foreign grain company to pull out of Russia, after reporting yesterday that Viterra will follow Cargill’s lead and soon leave. Grain is expected to continue to flow out of Russia, but on Russia’s terms with less transparency over what’s happening inside the country. The Russian farmer is ultimately the loser, which provides a disincentive for production going forward. The near-term market impact is to create uncertainty, leading speculative fund managers to exit large short positions, while drawing a bit more attention to problems in the U.S. southern and northern Plains that can impact output.

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Mike CastleThu, 06 Aug 2026, 13:24

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Matt ZellerWed, 05 Aug 2026, 12:39

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