Equity and commodities go risk-off overnight.
The first day of September is greeting the world commodity and equity markets with heavy selling following elevated political tensions between Taiwan/China overnight as Taiwan shot down a drone that intruded into its airspace. Ongoing Central Bank communique continues to push home the fact that US interest rates are heading higher for a longer period than many want to accept to break the back of inflation. The US monthly jobs report tomorrow is expected to show new hiring of 275,000-300,000, which will add to future inflationary concerns.
Since the Jackson Hole summit ended last Friday, the equity markets have been in a continual selling mode as the US dollar climbs back to the 109.00+ range. The US 10-year note is now trading at a new high of 3.2%, inspiring the strength in the dollar, which can ultimately have long-term effects on exports.
The Ukraine Agrarian Counsel estimated that the 2022 Ukrainian wheat production crop could fall to 15 MMTs, down from the predicted 18.6 MMTs earlier this year and below prewar wheat crops, typically over 25 MMTs. One-third of the wheat crop is in Russian-controlled territory, where future exports are in question. It’s anticipated that Ukrainian farmers will not risk planting winter wheat in the fall of 2022 in hopes that the war ends by next spring when summer row crop production would expand.
The USDA announced it will not update the US Weekly Export Sales data until September 15. The USDA is returning to the old legacy system and ensuring the data is correct.
Cattle futures continued lower on Wednesday, with feeder cattle finding support from the sliding feed values. The cash cattle trade was limited in all regions, with a small number reported in Texas for $141, which was $one lower from last week. Dressed trade in Nebraska was down $5 at $228. Box beef prices continue their slide with choice lower by $1.45 and select dropping $1.94.