Perspective: Morning Commentary for September 9

By: Arlan Suderman, Chief Commodities Economist

Fri, 09 Sep 2022, 13:40

Perspective: Morning Commentary

Arlan Suderman

Chief Commodities Economist

September 9 – Stock futures posted solid gains this morning, as both Treasury yields and the dollar pulled back from recent notable gains heading into the weekend. The VIX is trading below 23 for the first time in two weeks this morning, while the dollar index is trading notably lower at 108.9. Yields on 10-year Treasuries are trading near 3.31% at this hour, while yields on 2-year Treasuries are trading near 3.51%, with the inverse gap widening once again. The modest “risk-on” sentiment prevalent in this morning’s trade also supported positive money flow into the broader commodity sector, with crude oil prices up by more than 2%, and broad gains in the grain and oilseed sector as well.

The currency market remains quite volatile amid rapidly changing global dynamics. The dollar is again seen as a safe-haven asset as the Ukraine war lingers on, China locks down big portions of its economy to control Covid, and as the global economy teeters on recession. The Federal Reserve is among the more aggressive central banks in hiking interest rates currently, although others are starting to follow its lead now. However, the higher U.S. interest rates among the major economies make investments in the U.S. markets more attractive to foreign investors, requiring dollars to participate, and therefore increasing demand for the greenbacks. Japan’s yen continues to tumble, raising fears that the momentum may be difficult to stop. Keep in mind that the yen is in trouble because of failed monetary policy, which Ben Bernanke copied when he instituted quantitative easing nearly 15 years ago, although there are other challenges for Japan’s economy as well. The euro is struggling due to Europe’s challenges tied closely to being a neighbor to the Ukrainian war. That’s not going to change any time soon. China’s yuan is weak due to its strict Covid restrictions.

The dollar index hit fresh 20-year highs repeatedly this week, before pulling back over the past couple of sessions in a correction spurred by the European Central Bank’s 75-basis point rate hike. The strong dollar makes it very difficult for U.S. commodities to compete on the global market – especially for those commodities that are grown in many parts of the world, such as wheat, pork, and beef. Crude oil is another commodity that tends to be impacted by the strength of the dollar. Other commodities are less sensitive to the dollar because buyers have fewer options. The dollar’s strength will ebb and flow, but the path of least resistance continues to be higher for now.

Russia’s President Putin approved the start of operations for a new grain rail freight station on its border with China this week in Manzhouli-Zabaikalsk. It is the largest grain rail station in Russia with a capacity to move 8 million metric tons per year across the border into China. The two countries have been working on building the new grain corridor from Siberia to China over the past six years, shortening the both the time and costs needed to move grain from Russia to China. It’s expected to carry rapeseed, wheat, soybeans, and barley to China. The region serviced currently produced roughly 27 mmt of grain each year, but observers believe that this new market could encourage expansion of production to closer to 90 mmt.

President Putin is expected to meet with Turkey’s President Erdogan next week to discuss the Ukrainian safe corridor grain trade deal. The deal currently runs through much of November, but Putin has expressed his outrage at it in recent days. This casts doubt on the ability of the deal to survive, which may cause some shipping companies to think twice about sending vessels into Ukraine’s ports that could get trapped there without advanced notice. Nonetheless, Ukraine reports that nearly 1 mmt of grain moved out of the three approved ports in the first nine days of this month, bringing total exports (water & land) since July 1 to 5.3 mmt. That compares to 10.9 mmt of grains shipped in the same period a year ago. Total exports since July 1^st include 1.65 mmt of wheat, 447kmt of barley, and 3.17 mmt of corn. That compares to year ago shipments of 5.9 mmt of wheat, 3.0 mmt of barley and 1.34 mmt of corn in the same period. Ukraine’s wheat harvest is now essentially complete for 2022 at 19.2 mmt, down from 33.1 mmt a year ago, and 25.4 mmt in 2020.

USDA is scheduled to release its September WASDE crop report on Monday with its first corn and soybean production estimates based on actual field samples. The past 30 days of grain fill time in the western Midwest Corn Belt have been among the top 5 driest since 1979, with 58% of the area seeing less than half of its normal rainfall during the period, and 19% seeing less than a quarter of its normal rainfall. Temperatures averaged slightly above normal for the region during the past 30 days, but that was an average of very hot and quite mild days. Agronomically, we’d expect this combination to result in notably smaller seed size for both corn and for soybeans, but such a correlation is difficult to predict in any one year. All we can say at this point is that the risks of such are significantly elevated. Seed size changes from normal typically are not fully revealed until the combine runs, although USDA’s sampling can often times start to pick up on the problem in its September survey. A repeat of last month’s yields would suggest that this is not a significant problem, while a notable reduction in yields would suggest the likelihood of more reductions to come next month as well.

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Perspective: Morning Commentary for August 6

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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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Perspective: Mid-Day Commentary for August 4

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Mike CastleTue, 04 Aug 2026, 14:58

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