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Perspective: Morning Commentary for September 15

By: Mike Castle, Market Intelligence - Fertilizer Analyst

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September 15 – The Fed’s September meeting kicks off today with the market pricing in strong expectations of a 25-basis point hike being announced tomorrow as CME’s FedWatch now shows the probability of such a hike at 92.5%. This is currently expected to be followed up with a hold in October and one more 25-basis point hike in December. Hot inflation data, particularly concentrated at the producer level for now, is signaling the FOMC to move rates higher, while an impressively resilient U.S. labor market gives them permission to do so. It’s worth keeping in mind that this does set the table for a more significant surprise if the FOMC opts to hold steady, which I would not rule out at this point. The other thing worth keeping a close eye on is how much additional tightening is implied moving into 2027. New Fed Chair Kevin Warsh has been rather explicit in his intention for the Fed to provide less forward guidance and fade more into the background, but traders will surely be parsing through all his comments with a fine-tooth comb to shape their expectations for what lies ahead.

Stock futures are pointing to a turnaround Tuesday to start the day, while the VIX is holding effectively steady with where it ended yesterday near the 17 level. The dollar is in the green as the Fed meeting kicks off as traders price in expectations of higher rates ahead. Treasuries will likely remain in focus today with the 10-year yield back above that psychological 5.00% this morning, while 2-year yields firm to 4.65% on expectations of a hike tomorrow, and 30-year yields resume their push higher to hang around 5.375% at the time of writing. Crude oil is moderately higher to start the day, with nearby WTI up 0.8% to trade near $102.70 and nearby Brent up 1% to trade near $106.70. Fighting in Yemen continues to intensify, with the air response from the Saudis increasing while the Houthis launch widespread strikes targeting a variety of Saudi Red Sea port cities, most notably at the critical site of Yanbu. The ags are mostly lower to start the day with the wheat complex leading the way down again following perceived momentum in improving commodity flow through the Black Sea, while no fresh bullish fodder for corn or soybeans was found in yesterday’s Crop Progress report.

U.S. corn conditions rebounded 1% week-on-week to sit at 57% good/excellent, reversing course from the average analyst estimate of a 1% decline to 55%. This remains 10% below last year, as well as 2% below the previous five-year average at this time. Corn harvest advanced another 3% week-on-week to reach 8% complete, 1% slower than expected but still sitting ahead of last year’s 7% and the previous five-year average pace of 6%. The widespread heatwaves seen to finish the growing season have certainly sped up maturity but scattered heavy rains across the Midwest in the last week ultimately kept somewhat of a lid on progress at the national level. Meanwhile, U.S. soybean ratings held steady at 58% good/excellent, matching expectations, while we also got our first report of soybean harvest progress of the year, pegged at 6% complete nationally. This was notably above the average estimate of 5% and is double the previous five-year average pace of 3% at this time, again reflecting the rapid maturation due to recent excessive heat.

U.S. spring wheat harvest is nearing completion, advancing another 7% week-on-week to reach 93% complete. Spring wheat harvest had been notably ahead of schedule for much of the year but has slowed down at the tail-end following rain delays primarily seen in Montana, leading this week’s pace to now match this time last year and sit only 1% ahead of the average pace. It’s worth noting the harvest delays seen on the other side of the border as well, with Saskatchewan and Manitoba catching another round of rain over the last 24 hours, as localized totals up to 2” are likely pushing combines out of the field again. We’ll continue keeping an eye on not just the harvest delays on the Canadian Prairies, but also the rising potential for quality issues, with the ultimate question being whether or not this translates to additional demand for U.S. exports in the year ahead. While spring wheat season ends, winter wheat planting season is just entering full swing, advancing another 6% week-on-week to reach 8% complete, also matching analyst estimates. This is a bit behind schedule, however, trailing last year’s pace by 2% and the five-year average pace by 4%, with the delays primarily being seen across the Plains.

Given the poor state of soil moisture profiles seen in much of the traditional U.S. hard red winter wheat belt, it’s not a huge surprise to see farmers hesitant to go plant into dust today, as USDA’s subsoil moisture index for both Oklahoma and Texas are currently at their lowest level for the comparable week since at least 2015. Forecasts do show plenty of chances of rain for the Plains over the next two weeks, which should help drive more significant advancement if they verify. The sharp rally in wheat prices was well timed for prospective U.S. winter wheat growers, with yesterday marking the end of the fall Projected Price discovery period for 2027 crop insurance purposes. July 2027 Chicago wheat futures averaged $7.51/bushel during the period, with July 2027 Kansas City wheat futures averaging $8.11/bushel. As shown in the graphic below, this is a dramatic improvement from last year, with Chicago up $1.88/bushel and KC up $2.50/bushel, both marking their highest in four years and giving farmers an incentive to increase winter wheat acres in the year ahead.  

image 137550

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Perspective: Morning Commentary for September 15

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Perspective: Mid-Day Commentary for September 11

September 11 – The major stock indexes are all up roughly 1% at midday, with the VIX cooling notably to hang below 15.7, erasing yesterday's gains. The dollar continues to linger around unchanged, currently trading at 99.06. The front-end of the treasury yield curve continues to push higher amid increasingly hawkish rate expectations, with 2-year yields up to 4.615%, while 10-year yields are up more modestly to 4.955%, and 30-year yields are slightly lower on the day at 5.347%. Crude oil is still in the red as traders take weekly profits and assess Monday’s planned talks in Oman, with nearby WTI trading near $99.6 and nearby Brent trading near $105.2 at the time of writing. The ags are largely mixed, with corn reversing course and rebounding to trade in the green following the release of this morning’s September WASDE.

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