Perspective: Morning Commentary for February 28

Perspective: Morning Commentary
Arlan Suderman
Chief Commodities Economist



Guest Commentary by Matt Zeller, Senior Market Intelligence Analyst


February 28 – Dow Jones Industrial Average futures are indicating a third straight losing session to start the week, following Friday’s record high; markets are taking a hit globally and chip makers are weighing down the tech sector. U.S. GDP coming in a tick below expectations with inflation indicators a tick higher this month should keep a lid on things for now – sticky inflation readings will continue to caution the Fed and delay any impending rate cuts.  


The U.S. dollar index closed slightly higher yesterday to end a five-session losing streak, and it’s bouncing solidly this morning due to an influx of safe-haven dollars after Chinese stimulus measures and a dovish Bank of New Zealand rate decision. The greenback is holding on to gains even after Q4 GDP came in a tick below expectations at +3.2% from last quarter, though personal consumption beat the average 2.7% trade guess at 3.0%, while the key Core PCE Price Index rose 2.1% from Q3, above the 2.0% trade estimate and a tick ahead of the previous figure.


A Federal Government shutdown still looms on Saturday, with funding set to expire at 12:01 AM on March 2 for parts of the government – around 20% of federal agencies. The remaining 80% would shut down a week later, including the Department of Defense and Homeland Security. Most markets would likely be unaffected unless a shutdown were to drag on for some time; President Biden met with congressional leaders yesterday to push towards an agreement, with much of the focus on extending U.S. aid to Ukraine.


Corn and soybeans carved out multi-year lows on Monday, but have yet to really bounce from those levels as the week progresses; the former is at least holding above its sub-$4/bushel bottom with some confidence, but the latter remains only pennies from lows and under pressure from hefty South American supplies. Brazilian crushing group Abiove cut their 2023/24 Brazilian production estimate from 156.1 to 153.8 MMT this morning, now down from 159 MMT last season but in line with or even above most recent private estimates. StoneX Brazil was down to 150.35 MMT at the start of this month and they’ll re-issue results on Friday; Conab’s official BRZ estimate was below the 150 MMT mark in early February, at 149.4 MMT. The USDA only trimmed their number from 157 to 156 MMT in the February S&D, so presumably they’ll have more work to do on that next Friday. Regardless, Brazilian production in the 150 MMT range and Argentina around 50 MMT still leaves total South American output at 15+ MMT better than any season prior, and keeps the pipeline full through 2023/24 for major world soybean importer China.


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