Perspective: Morning Commentary for September 7

By: Arlan Suderman, Chief Commodities Economist

Wed, 07 Sep 2022, 13:31

Perspective: Morning Commentary

Arlan Suderman

Chief Commodities Economist

September 7 – Stock futures came under light pressure overnight, as traders fretted about the adverse effect of rising interest rates on the economy. The VIX is trading near 27 this morning, while the dollar is trading near 110.7, after hitting a new 20-year high near 110.8 earlier this morning. Yields on 10-year Treasuries are trading near 3.30%, after hitting a new 11-week high above 3.36% earlier this morning. Yields on 2-year Treasuries are trading near 3.48%, as the gap continues to narrow. Crude oil prices are down more than 3% at fresh seven-month lows on the economic concerns, while the grain and oilseed markets are generally higher to start the day.

The path of least resistance for crude oil is currently lower as the market balances fears that Russia will cut off European energy supplies with fears of a larger global recession. OPEC+ tried to calm market fears with a 100K barrel per day cut scheduled for next month, but that did little to ease concerns with much of China under Covid restrictions and lockdowns, and much of the West facing recession threats. China’s crude oil imports were 10% lower in August year-on-year due to the restrictions. Meanwhile, a break in the Japanese Yen to 24-year lows helped propel the dollar to fresh 20-year highs, adding additional headwinds for the crude oil market.

Argentina’s fire sale on the peso may be a short-term band aid on a long-term problem, but it’s working to move soybeans thus far. The first day of the offer of 200 pesos for every dollar’s worth of soybeans moved an estimated one million metric tons, with some observers in China thinking the plan could end up moving eight to 12 mmt. Argentina is the world’s largest exporter of soymeal and soyoil. Most of its soybeans are processed before they leave the country. But Chinese buyers are opportunists, and they see an opportunity at hand. As such, our cash sources on the ground in China report that China bought seven cargoes of Argentine soybeans on Tuesday at a discount of $22 per mt (60 cents) below Brazilian values, as described in today’s edition of China Direct, published by our Shanghai office. Argentine soybeans have a lower protein value, but they were still $7 per mt (20 cents) cheaper adjusting for that.

China imported 7.16 mmt (263 million bushels) of soybeans in August, according to its customs data, the lowest total since 2015, and nearly a quarter less than normal for the month. That put marketing year (September to August) soybean imports at 90.77 mmt (3.335 billion bushels), down nearly 12 mmt from the previous year. Imports in the final quarter of the marketing year were down 9.37 mmt on the year, which is a third less than the previous year, and 14% lower than the five-year average for the period. The decline in imports was largely reflective of soft demand due to poor feeding margins, Covid lockdowns that reduced pork consumption, and due to the availability of reserve soybeans on the market. Hog feeding margins are improving, but demand is expected to remain soft through the first quarter of the new marketing year as well, with imports possibly down 25% from the previous year. However, it should be noted that crush surged to 1.98 mmt last week, increasing by nearly 25% over the previous week, and slightly above the pace in the same week last year as feeding margins improve faster than expected. Soymeal stocks are 34% lower than the previous year and 30% below the five-year average for the week.

It took longer than I expected, but Russian President Putin has a beef with the grain initiative that allows ships to have safe passage from three Ukrainian ports. Putin has no interest in seeing Ukraine benefit from large grain sales at a time when sales from his own country are sluggish following a big crop. The revenues help support Ukraine’s ability to defend itself, which goes contrary to Russia’s overall objective. As such, I’ve been expecting Putin to find a reason to say that Ukraine violated the terms of the agreement so that he could justify further aggression against Ukraine. His complaint today is that only “two” of the cargoes leaving Ukraine ports were destined for poor countries. Thus far more than 200 vessels have been cleared to move grain out of Ukraine as part of the agreement, although less than half of them have done so to this point, and most of those ships were small. A total of 96 ships have been allowed to leave Ukrainian ports, while 108 have been given clearance to arrive at the ports. Ukraine customs reports that grain and pulse exports in August totaled 2.264 mmt, down from 5.589 mmt the previous year. Total export shipments for July and August combined were 3.946 mmt, down from 8.625 mmt the previous year. The August total included 2.498 mmt of corn and 1.1139 mmt of wheat shipments.

Condition index scores declined for both corn and soybeans on Monday afternoon, although my corn yield model still rose 0.2 bushels to 171.2 bushels per acre. My soybean yield model slipped slightly lower to 51.9 bushels per acre. The bottom line is the corn crop is getting smaller, while the soybean crop appears to be holding near trend levels. Soybean stocks are rising, while corn demand must be rationed. Wheat led the way higher on the above story about Putin’s complaints about Ukraine exports, helping to support the rest of the complex in overnight trade.

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Matt ZellerTue, 04 Aug 2026, 12:43

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Mike CastleMon, 03 Aug 2026, 15:10

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