Perspective: Morning Commentary for May 2

By: Arlan Suderman, Chief Commodities Economist

Mon, 02 May 2022, 12:30

Perspective: Morning Commentary

Arlan Suderman

Chief Commodities Economist

May 2 – It’s Fed week on Wall Street. Nerves are elevated as we head into Fed week, although stock futures traded mixed overnight. You could say that most of the hawkish expectations are priced into the market, but traders are nervous, nonetheless. The VIX is trading at nearly eight-week highs this morning near 35 as traders brace for Wednesday’s Fed statement. The dollar index is trading higher near 103.4, although still just below last week’s 19-year high. Yields on 10-year Treasuries are trading near 2.91% ahead of the Fed meeting. The broader commodity sector is mostly lower this morning, except for those commodities like natural gas that have a strong imminent story, as headwinds from the elevated VIX and strong dollar blow against most of these hard assets. Crude oil prices are down more than 3%, with added pressure coming from the Covid-related lockdowns in China. The Ags also feel the pressure of a slightly better weather outlook to start the new trading month, although their challenges remain significant longer-term.

This week’s meeting of the Federal Reserve is the most significant item on the docket for traders on Wall Street. Yes, the intensifying war in Ukraine lingers on, as do the lockdowns in China and inflation here at home and around the world. Those are all challenges for the economy under consideration by Wall Street traders. But, for now, Wednesday afternoon’s updated monetary policy statement from the Federal Reserve is the most important item on the agenda. Massive fiscal and monetary stimulus provided the candy jar that supplied money flow into the markets over the past two years. Traders don’t want to see that end via a shrinking of the balance sheet. Yet, they also understand that something needs to be done to tame inflation, which is also be detrimental to the economy, and it can also undermine money flow into the markets. So, traders know that the economy needs medicine via monetary tightening, but it questions whether the Fed will prescribe the proper dose of the medicine? Too weak of a dose could allow inflation to get totally out of hand, as it did four decades ago, requiring even more painful treatment by Paul Volker. Too strong of a dose could straight-line the economy, sending it into shock.

Fed fund futures trading this morning puts the odds of a 50-basis-point increase in the Fed’s benchmark interest rate on Wednesday at 99.8%. Anything more or less than that amount would be a surprise to the market, which would likely create a sharp reaction from traders. Fed fund futures also put 99.8% odds of a 75-basis point rate hike at the Fed’s June meeting, followed by 97% odds of a 50-basis point hike at the July meeting. In total, the market currently reflects expectations that we will see the benchmark rate rise 275 basis points over the next six meetings remaining this year, including this week’s meeting, which would take the rate to the 300-325 basis point range by December. But the question remains, is that too much or too little, especially considering some of the other challenges faced by the economy? Traditional theory argues that the rate should exceed inflation to garner positive real returns, which would mean pushing the inflation rate above 5%. But that would blow up the federal budget, increasing the portion of the budget dedicated to paying interest on the national debt to almost $2 trillion per year. Yet, the larger question facing traders on Wednesday likely focuses on the rate of shrinking the balance sheet – withdrawing stimulus (the candy jar) from the economy. The current thinking is that the Fed will shrink the balance sheet at a pace of $95 billion per month, but that could easily change in either direction as Fed members meet on Tuesday and Wednesday.

Spring planting continues in Ukraine, with many farmers wearing protective armor as they drive their tractors. The Ukraine government reports that farmers had planted spring crops on 4.395 million hectares as of Thursday, which is 26% of last year’s figure, including 2.071 million hectares planted to spring grains, which is 27.8% of last year’s total. Spring wheat planted area totaled 176K hectares, which was 92% of year ago levels, while spring barley totaled 838K hectares, or 60% of year ago levels. However, just 775K hectares of corn had been planted, which was 14% of year ago levels, as farmers focus on planting crops requiring fewer resources. Sunflowers were planted on 1.369K hectares, which is 21% of year ago levels. At least some planting occurred in all oblasts except Luhansk.

Follow-through selling weighed on wheat prices overnight after increased rains inflicted some technical damage to end last week’s trade. The outlook for the Midwest is warmer this morning, with a bit of a break in the wet pattern as we start week two, although planting windows are still expected to be narrow. Nonetheless, the market expects this afternoon’s USDA weekly crop progress report to show that farmers took advantage of last week’s window to advance planting in many areas of the Midwest. The above combined with a strong dollar index and elevated VIX above 30 to spur active selling overnight in the grain and oilseed sector. We should see some money come into the markets with the start of a new trading month, but nerves will be high ahead of this week’s monetary policy statement on Wednesday. Another key fundamental item will be this morning’s USDA export inspections report – especially for corn and for soybeans in light of recent purchases of both made by China.

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Perspective: Morning Commentary for August 12

August 12 – Today’s focus is on inflation, with the July consumer price index data out this morning. We have this, and one more month of data, ahead of the next Federal Reserve meeting. Of course, headlines from the Middle East and the Black Sea wars also have an ongoing influence on the markets. Stock futures posted gains this morning, while the VIX traded just below 15. The dollar index traded near 99.7. Yields on 10-year Treasuries are trading near 4.66%, while yields on 2-year Treasuries are trading near 4.18%. WTI crude oil is trading near $83, while Brent trades near $88 per barrel. The grain and oilseed markets rebounded from yesterday’s losses ahead of today’s highly anticipated WASDE crop report that is due out at Noon Eastern Time.

Arlan SudermanWed, 12 Aug 2026, 13:33

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Perspective: Morning Commentary for August 11

August 11 – It was generally a quiet night for the markets until early this morning when a headline hit that Iran and Oman were close to reaching a deal. Stock futures rallied, while the dollar index followed Treasury yields lower, along with active selling in the energy- and food-based commodities. The headline had limited impact though in a world that has become skeptical of promises of peace. Stock futures remain steady to firmer at this hour, while the VIX trades near 16 – just above 2026 lows. The dollar index is trading near 99.8 this morning, after recovering from its early morning selloff over the following hour of trade. Yields on 10-year Treasuries are trading near 4.69%, while yields on 2-year Treasuries trade near 4.22%. WTI crude oil is trading near $82 per barrel at this hour, while Brent trades near $88. The grain and oilseed markets are mostly weaker, after failing to recover from this morning’s early selloff that started in the crude oil market.

Arlan SudermanTue, 11 Aug 2026, 13:21

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Perspective: Mid-Day Commentary for August 10

August 10 - Stocks traded quietly mixed to weaker through much of the morning as investors weigh Middle East war / peace headlines with artificial intelligence concerns / opportunities. Ironically, the VIX is trading near 15, putting it just barely above 2026 lows, despite the high level of geopolitical risks and AI concerns. The dollar index continues to consolidate largely between 99.5 and 100.0 after the late July break in what appeared to be Japanese central bank currency intervention. Yields on 10-year Treasuries are trading near 4.70%, while yields on 2-year Treasuries are trading near 4.24%. WTI crude oil is trading near $81 at this hour, while Brent trades near $87 per barrel on the geopolitical risks. The grain and oilseed markets are mixed ahead of Wednesday's big USDA WASDE crop report.

Arlan SudermanMon, 10 Aug 2026, 17:02

Grains & Oilseeds

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