Perspective: Morning Commentary for November 16

Perspective: Morning Commentary
Arlan Suderman
Chief Commodities Economist

November 16 – The government is now funded through January 19th, but Wall Street is focused on a bigger-than-expected rise in weekly jobless claims in this morning’s data that raises concerns about the health of the U.S. economy. Additional concern comes from Walmart’s caution about consumer spending as we head into the holiday season. Even so, the VIX traded below 14 to its lowest point in more than eight weeks this morning, even though stock futures traded modestly weaker. The dollar index is trading near 104.2 in early trade. Yields on 10-year Treasuries are trading near 4.46%, while yields on 2-year Treasuries are trading near 4.83%. Crude oil prices are nearly 2% lower on the economic concerns, while grain and oilseed prices are also lower on those headwinds.

First-time claims for unemployment benefits rose to 231K in the week ending November 11, up from 218K the previous week, and above analyst expectations of 222K claims. That pushed the four-week moving average to 220.25K claims, up from 212.5K the previous week. Continuing claims for the week ending November 4 rose by another 32,000 during the week to 1.865 million, which is the highest level for continuing claims since November 27, 2021. The four-week moving average for continuing claims rose by 34,500 to 1.823 million. The above numbers combined show signs of a softening jobs market, which is necessary for bringing down wage inflation sufficiently to hit the Federal Reserve’s 2% inflation target. It’s not enough of a softening yet, but Wall Street will certainly see it as a move in that direction, increasing their expectations of a policy pivot next year.

The long-anticipated meeting between Xi Jinping and Joe Biden came without much fanfare on Wednesday. Both sides had attempted to suppress expectations, with the focus on the two of them merely starting to talk once again. The leaders of the world’s top two powers agreed to resume top-level military dialogue, hoping to avoid an accidental war due to miscommunication, which is a positive. There was also some consensus on cooperating on drug trafficking, although we’ve been down that road before. However, there was little to no announced progress on anything that would suggest a turn in trade policy or investments in China – those things that are causing long-term pain for China’s economy. Neither were there any breakthroughs in the tensions over Taiwan. President Biden made it clear that U.S. law requires us to defend Taiwan if it is invaded, while President Xi Jinping reiterated that China will eventually “reunite the island nation to the mainland. The two superpowers remain at a high level of tension in their relationship, which is one reason why it was important for their militaries to re-establish communications. But the economic challenges remain for China.

Scattered thunderstorms are expected to start popping up in northern Mato Grosso as we move into the weekend, becoming more numerous and widespread as we get into next week, providing much-needed relief for dry areas of Mato Grosso. The European model is much wetter than the GFS model, calling for widespread 3-5” rains across much of the soybean belt. The GFS has much lighter and scattered amounts. We’ll likely see something in between the two. The bottom line is that dry areas of Brazil should see good rains over the coming week to 10 days, before the pattern reverts hotter and drier once again. The climatologists that I talk to expect this pattern to continue well into December, with overall rainfall coming in well below normal for the period as a whole in Center-West Brazil.

The question then will be, can the rains that do fall provide enough moisture to avoid a major shortfall in Brazil production overall? Looking back at history, Commodity Weather Group identifies the 2015-16 growing season as the one that most closely matches the current weather pattern for the growing season to this point. That year saw yields drop by 11% in Center-West Brazil, while being up 9% from near record rainfall in southern Brazil, similar to this year’s pattern. Yields were down by 41% from trend in northeastern areas of Brazil that year, where production is less concentrated. Brazil as a whole saw the national average yield down 8 – 9% from trend, depending on how you calculate your trend yield. That would put national production near 148 – 149 mmt. As I’ve shown before, there is a path for Brazil to produce a crop of that size without increasing U.S. exports beyond USDA’s current target. Will this year see deeper losses than the 2015-16 growing season? Possibly it will, but we do not yet have evidence of such. That market has been adding risk premium on the possibility that losses are greater. Now we need to see how that plays out. For now, we enter into what is expected to be a wetter phase of that weather cycle. Meanwhile, corn and wheat continue to lack a story, with ample supplies coming out of Brazil (corn) and the Black Sea (corn and wheat), and the predominant bent on Wall Street currently being one of a sluggish economy that slows demand.

The StoneX Group Inc. group of companies provides financial services worldwide through its subsidiaries, including physical commodities, securities, exchange-traded and over-the-counter derivatives, risk management, global payments and foreign exchange products in accordance with applicable law in the jurisdictions where services are provided. References to over-the-counter (“OTC”) products or swaps are made on behalf of StoneX Markets LLC (“SXM”), a member of the National Futures Association (“NFA”) and provisionally registered with the U.S. Commodity Futures Trading Commission (“CFTC”) as a swap dealer. SXM’s products are designed only for individuals or firms who qualify under CFTC rules as an ‘Eligible Contract Participant’ (“ECP”) and who have been accepted as customers of SXM. StoneX Financial Inc. (“SFI”) is a member of FINRA/NFA/SIPC and registered with the MSRB. SFI is registered with the U.S. Securities and Exchange Commission (“SEC”) as a Broker-Dealer and with the CFTC as a Futures Commission Merchant and Commodity Trading Adviser. References to securities trading are made on behalf of the BD Division of SFI and are intended only for an audience of institutional clients as defined by FINRA Rule 4512(c). References to exchange-traded futures and options are made on behalf of the FCM Division of SFI . StoneX is a trading name of StoneX Financial Ltd (“SFL”). SFL is registered in England and Wales, Company No. 5616586. SFL is authorized and regulated by the Financial Conduct Authority [FRN 446717] to provide to professional and eligible customers including: arrangement, execution and, where required, clearing derivative transactions in exchange traded futures and options. SFL is also authorised to engage in the arrangement and execution of transactions in certain OTC products, certain securities trading, precious metals trading and payment services to eligible customers. SFL is authorised & regulated by the Financial Conduct Authority under the Payment Services Regulations 2017 for the provision of payment services. SFL is a category 1 ring-dealing member of the London Metal Exchange. In addition SFL also engages in other physically delivered commodities business and other general business activities which are unregulated and not required to be authorised by the Financial Conduct Authority. StoneX Group Inc. acts as agent for SFL in New York with respect to its payments services business. StoneX APAC Pte. Ltd. acts as agent for SFL in Singapore with respect to its payments services business. ‘StoneX’ is the trade name used by StoneX Group Inc. and all its associated entities and subsidiaries.


Trading swaps and over-the-counter derivatives, exchange-traded derivatives and options and securities involves substantial risk and is not suitable for all investors. Past performance of any futures or option is not indicative of future success. Indicators are not a trading system and are not published as a specific trade recommendation. The information herein is not a recommendation to trade nor investment research or an offer to buy or sell any derivative or security. It does not take into account your particular investment objectives, financial situation or needs and does not create a binding obligation on any of the StoneX group of companies to enter into any transaction with you. You are advised to perform an independent investigation of any transaction to determine whether any transaction is suitable for you. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of StoneX Group Inc.


© 2023 StoneX Group Inc. All Rights Reserved.

Discover more insights

Our subscribers have access to comprehensive market analysis from StoneX spanning commodities, equities, currencies and more.
See why StoneX is a partner of choice

Let’s get connected

To learn more about how our customized financial solutions can help you stay one step ahead in the global markets, contact our team today.

Select your Location

Contact us


By submitting this form, you are sending StoneX Group Inc. and its subsidiaries your personal information to be used for marketing purposes. View our  Privacy policy  to learn more.

If you're an existing customer, please direct any inquiries to your StoneX sales team.