Week In Review
The Week in Under 60 Seconds
We’re back, baby.
Shrinking U.S. crop expectations and escalating Black Sea disruptions pushed corn, wheat and soybeans to new highs, while soybean oil took yet another policy-driven roller-coaster ride.
Daily Play-by-Play
Monday: Corn’s rally gained momentum on declining U.S. yield prospects while SRE fears sent soybean oil and RINs sharply lower.
Tuesday: Corn posted a fifth straight gain after another sharp drop in crop ratings, while soybean oil held beans back early before the complex rallied into the close.
Wednesday: Black Sea escalation sent Chicago wheat limit-up and helped corn to new multi-year highs.
Thursday: Strong new-crop sales and concerning finishing weather helped beans recover from early weakness, while reports that waived biofuel gallons could be restored through a supplemental rule helped soybean oil make a 300pt U-turn.
Friday: The week ended with a bang: corn, beans and meal made new highs, wheat hit three-year highs and supplemental-rule reports sent soybean oil 259 points higher.
Energies & Macro
Energies backed off last week while the Fed turned up the pressure.
Key Takeaways
Crude posted its first weekly loss in three weeks after falling in four of five sessions. WTI fell 4.2% to $83.40, while Brent dropped 5.4% to $89.31 as the market grew more confident that Middle East oil would continue flowing despite ongoing disruptions.
Diesel remains the bigger problem for ag. Crude has tapped the brakes, but distillate inventories are tight, refining margins are historically strong and Russia’s fuel export restrictions run through January. Nearby ULSD futures fell 3% last week to $4.25, yet remain near 20-year highs.
New Fed Chair Kevin Warsh put rate hikes back in play. Speaking at the Fed’s annual Jackson Hole symposium, Warsh used his first major address as chair to signal he is willing to raise rates if inflation doesn’t keep easing. Higher rates are the Fed’s primary tool for slowing the economy and bringing inflation down, and the comments pushed September hike odds above 50% from roughly 35% before the speech.
Warsh’s comments lit a fire under the dollar Friday. The US Dollar Index jumped almost immediately after his Jackson Hole speech as markets priced in a greater chance of a September rate hike, with Friday’s rally leaving the DXY with its biggest weekly gain in more than two months.
Gold got taken to the woodshed. Warsh’s rate-hike talk sent the inflation-hedge crowd running for the exits in precious metals Friday morning, with December gold falling nearly 3% to close near $4,530 and silver dropping 3.5% to $67.79.
Ag commodities are on their longest winning streak in more than 30 years. The S&P GSCI Agriculture Index has risen 11 straight sessions - its longest winning streak since 1994. We’re still well below the 2022 highs, but the persistence of the move is notable as agriculture moves back into focus.
Bottom Line: Energies & Macro
Crude has backed off, but diesel remains historically expensive and the Fed just added a stronger dollar and higher-rate risk to the mix. That’s a tougher macro backdrop for commodities in general — which makes agriculture’s continued strength that much more notable.
Soy Complex
Soybeans posted a fourth straight weekly gain in another standout week as shrinking crop expectations ran headfirst into strong demand. Meanwhile, soybean oil went on a classic policy-driven, headline-fueled roller coaster that is aging anyone in the space at breakneck speed.
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