U.S. interest rates and the stock market are in a holding pattern as we await this week’s FOMC meeting (beginning Tuesday) and the subsequent interest rate decision on Wednesday afternoon. A pause is likely, however, the Federal Reserve is in a difficult position given last week’s 3.7% print for the Consumer Price Index, driven by higher gasoline prices. On the flipside, labor markets and consumer spending on goods continue to soften, as Fed tightening over the past 18 months are starting to take effect. Stay tuned.
The September WASDE report included several adjustments that were largely expected due to heat and drought. What is fascinating is the tightness of the global wheat situation, coupled with the fact that wheat prices don’t seem to care. Beyond the Fed, we are focused on hurricane activity, low water levels on the Mississippi River and Panama Canal, the latter being a major risk for global trade, and the risk of a U.S. government shutdown. We are also closing watching oil prices (Brent Crude is trading near $95/barrel this morning), and continued Chinese military activity near Taiwan’s airspace.
Despite these risks, the New York Giants found a way to win on Sunday, coming back from a 20 point deficit at half-time to beat the Arizona Cardinals 31-28, the biggest comeback in the franchise’s history. The Washington Commanders also had an impressive turnaround, so at least (for the authors of the Executive Briefing) we start Monday on a positive note.
The Watch List: What We Are Monitoring
Monetary Policy
- The Federal Reserve’s interest rate decision comes out this Wednesday. Most expect a pause, however the fed is in a difficult position given rising CPI in August.
Harvest
- The September WASDE included downward revisions for U.S. corn and soybeans due to ongoing heat and drought issues in the Midwest. The other big item was that global wheat ending stocks are estimated to be the lowest since 2015/16.
Logistical Bottlenecks
- Low water levels on Mississippi River threaten the movement of grain, while a similar situation on the Panama Canal is also bad for U.S. exports, as well as fertilizer, chemicals and liquid national gas.
Brazil Ethanol
- We often talk about Brazil outproducing the U.S. in terms of soybeans and corn, however, a new development has occurred. The country is now expected to produce 8.7 billion gallons of ethanol in 2023, 5% more than it produced last year, in part due to a surplus of local sugarcane and more corn-ethanol production. The government is also considering increasing the gasoline blend rate from 27% to 30%.
Government
- Shutdown risk is back on the table for the U.S. Government on October 1, 2023.
Key Market Data
| Index / Commodity | YTD ∆% |
| Dow Jones Industrial Average | 4.44% |
| S&P 500 Index | 15.91% |
| Nasdaq Composite Index | 30.97% |
| Brent Oil | 9.73% |
| Crude Oil WTI | 13.09% |
| Gasoline RBOB | 10.11% |
| U.S. Natural Gas | -40.92% |
| Key Interest Rates | Yield |
| 10-Year Treasury | 4.34% |
| 2 Year Treasury Yield | 5.04% |
| 3 Month Treasury Yield | 5.47% |
| Federal Funds Rate | 5.25% to 5.50% |
Source: Barchart and CNBC / Refinitiv
Ag Commodities
3-Month Spot Performance
Source: Barchart.com
Upcoming Events
Monday, 9/18/2023
• Home Builder Confidence Index
• Grain Inspections and Crop Progress
Tuesday, 9/19/2023
• Housing Starts and Building Permits
• USDA Food Expenditure Series
Wednesday, 9/20/2023
• Federal Reserve Interest Rate Decision
• Fed Chair Powell press conference
Thursday, 9/21/2023
• Initial Jobless Claims, Philadelphia Fed Manufacturing Survey, U.S. Current Account Deficit, U.S. Leading Economic Indicators, Existing Home Sales
• Weekly Crop Export Sales, Livestock Slaughter
Friday, 9/22/2023
• S&P flash U.S. Services and Manufacturing PMI
• Cattle on Feed
Saturday, 9/23/2023
• 25 years ago today the U.S. Government bailed out Long-Term Capital Management, a large hedge fund that failed.
Saturday, 9/30/2023
• End of fiscal year for the government, last day congress has to authorize spending in order to avoid a government shutdown.
Sources: New York Fed Calendar; USDA Agency Reports, Barron’s Preview, Seeking Alpha Saturday, MarketWatch
Numbers of Interest
+3.7% Latest reading of headline Consumer Price Index (CPI) for August, up from 3.2% for July
19% to 50% Between January 2021 and August 2023, the Food and Gasoline price components of CPI increased by 19.3% and 49.9%, respectively
$0.51 Amount of fuel ethanol profit per gallon (up from $0.48/gallon two weeks ago, as estimated by Iowa State University (ISU-CARD).
$5.6 billion Price that J.M Smucker is paying to acquire Hostess Brands, the well-known maker of Twinkies™
$1.4 Billion Amount that accounting and consulting firm E&Y has reportedly spent on artificial intelligence (AI) initiatives.
$237,482 Represents the average cost of raising a child in the United States until the age of 18 according to CBS News.
-12.5% European gas consumption is estimated to be down by 10% to 15% compared with the decade prior to Russian’s invasion into Ukraine in February, 2022.
Kenneth Scott Zuckerberg is Lead Industry Analyst, Farm Supply & Biofuels, CoBank
