Perspective: Morning Commentary for November 2

By: Arlan Suderman, Chief Commodities Economist

Tue, 02 Nov 2021, 13:09

Perspective: Morning Commentary

Arlan Suderman

Chief Commodities Economist

November 2 – Stock futures were mixed overnight as the Federal Reserve prepares to begin two critical days of meetings that are expected to culminate tomorrow afternoon with a road map toward tapering. Wall Street is also monitoring Washington, where we may see a vote on the infrastructure bill. The VIX is trading near 16 once again this morning, so call it cautious complacency. The dollar index is consolidating near 93.9 after a wild couple of sessions in the currency market that has seen big swings in the dollar and in the euro – largely in opposite directions of one another. Yields on 10-year Treasuries continue to consolidate near 1.57%. Crude oil prices posted modest losses this morning as they consolidate just below last week’s seven-year highs. The Ags are mostly higher in early trade today, although the lack of strength in crude oil removes a little of the upward momentum for the sector.

The Federal Reserve currently purchases $120 billion in securities per month, made up of $80 billion in Treasury securities and $40 billion in agency mortgage-backed securities. That comes to $1.44 trillion per year in monetary stimulus pumped into the economy. The Fed is expected to slow those purchases, which reduces demand for the securities while also reducing the amount of money being injected into the economy. Reducing demand for the securities is expected to increase yields on these securities, which are being held artificially at negative real values relative to the inflation rate by the Fed’s asset purchasing program. Reducing the injection of money into the economy is expected to slow consumer demand, easing escalating supply chain disruptions and inflation pressures, which the higher interest rates are expected to do as well. Wall Street will also be closely watching verbiage in tomorrow’s statements that provides indications of the Fed’s plans for raising its benchmark short-term interest rate. All of the above is expected, and it is already priced into the markets. The risks are a surprise in the speed of the tapering and rate hikes. The risks to the markets would be that the speed of both would be faster than that anticipated by the markets. I would add that the greatest risk to the markets would be if the Federal Reserve would make statements tomorrow that communicate to the markets that it fails to grasp the risks presented by current inflation pressures, and / or that it does not have a sufficient plan to deal with those risks.

China reported 54 new local Covid-19 cases today, as the latest outbreak(s) continues to spread. The new cases were concentrated in Heilongjiang, where there were 27 cases, but other new cases were seen in Hebei, Gansu, Shandong, Inner Mongolia, Jiangxi, Qinghai, Beijing and Ningxia. More lockdowns and restrictions are a product of the expanding cases. China Direct, our newsletter produced in Shanghai, notes that the Heilongjiang cases could create disruptions in corn and soybean logistics in the region, while the new cases in Shandong could create disruptions in this key soybean crushing hub.

StoneX released the results of its November 1^st customer production survey Monday afternoon, revealing that both this year’s corn and soybean crops are getting bigger. The survey pegged the U.S. corn yield at a record 177.7 bushels per acre, up from 176.6 bpa the previous month. The soybean crop is expected to yield 51.9 bushels per acre, up from 51.3 bpa the previous month. Other private estimates are expected to be released over the next several days, with USDA weighing in next Tuesday when the agency releases its updated monthly WASDE report. The larger crop size adds modestly to the size of this year’s supply, but it’s not the primary focus of the market currently. Recent market behavior suggests that commodity inflation is drawing money into the sector, with the focus on those assets that have the best story. That has been Minneapolis wheat, the edible oils, and corn.

Minneapolis wheat is the poster child for global quality milling wheat supplies, which are tight among the world’s major exporters. They are expected to remain tight until the production cycle is able to restore stocks. The edible oils are seen as a new energy source, as they provide the feedstock for the new generation of renewable standalone fuels. The excitement around these new fuels is on par with the ethanol revolution of 15 years ago, although it will likely be slower to develop as the political support and industry infrastructure are developed. As for corn, it is the most input-concentrated crop produced in the Ag sector. High input costs, and availability concerns, increase the risk that we will see both reduced area planted and reduced yields globally over the coming year. Things could certainly change over the next six months, but the margin for error is small, and traders are building in risk premium just in case. The bottom line is that the above factors make a good story for money seeking a home in an environment focused on inflation. Change the inflation story, and traders would see these stories differently.

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Perspective: Morning Commentary for August 7

August 7 – The U.S. economy unexpectedly lost 23k jobs in July, dramatically below market expectations of an 80k increase and marking the worst Non-Farm Payrolls print since February. Furthermore, May and June were both revised sharply downward, with combined revisions showing 103k fewer jobs than previously reported. Outside of the healthcare sector, which added 22k jobs in July, the losses were very broad-based. Government payrolls saw the largest decline, shedding 53k jobs in July, the largest seen since October 2025, while June was revised down to show a loss of 10k jobs as well. The private sector at least saw growth, adding 30k jobs in July, now matching the month prior after it was revised down from the 49k initially reported, and substantially missing forecasts of 78k jobs being added. This is a sharp reversal in course from the largely better than expected U.S. labor data seen earlier this week.

Mike CastleFri, 07 Aug 2026, 13:26

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Mike CastleThu, 06 Aug 2026, 13:24

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Perspective: Mid-Day Commentary for August 5

August 5 – The Dow Jones is ripping higher for yet another session, up safely over 500 points at the time of this writing to carve out another record high; the S&P and NASDAQ are a bit less enthusiastic but the former is still making its own record high, while the latter is less than 500 points off its own top thanks to a strong ongoing week of trade. The dollar is churning lower this morning in an effort to re-test Monday’s 1 ½-month low, while the ten-year note has flipped higher in the mid-morning hours. The CME FedWatch tool interesting has market odds of a quarter-point rate hike next month coming closer to a 50-50 proposition as crude oil prices decline.

Mike CastleWed, 05 Aug 2026, 15:19

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