Who says July is a slow month?
Here’s what is happening for the week ahead:
Key Economic Decisions & Reports: Markets expect the Fed to rise rates by 25bps to 5.25% to 5.50% at the conclusion of this month’s FOMC meeting on Wednesday. The key question: is the Fed done for now given recent declines in inflation? We also get a first look at M2 on Tuesday, 2Q 2023 Gross Domestic Product (GDP) (first look)) on Thursday (+1.4% expected) and June Core Personal Consumption Expenditures (PCE) on Friday (+4.2% expected)
Earnings Reports: More than 40% of the S&P 500 report earnings this week. In the upstream agriculture space, key names include: Archer Daniel Midlands, LSB Industries, AGCO (Challenger, Fendt, Massey Ferguson brands) and CNH (Case New Holland and International Harvester brands).
The Watch List
- Interest Rates and M2
- The Fed is widely expected to raise its target range for Federal funds by 25 basis points to 5.25% to 5.50% on Wednesday following its two-day FOMC meeting. M2 (measure of money supply) comes out the day before. Markets are hoping for a “Goldilocks” report (i.e., just right) showing a decrease in M2 to relieve inflationary pressure, but not too much which would add to recessionary pressure.
- Russia/Ukraine
- Russia finally made good on its threat to pull out of the Black Sea Grain Initiative, however, surprise missile and drone attacks on several Ukrainian ports (unexpected) drove a rally in wheat prices. Both Russia and Ukraine will treat any ship in the corridor as assumed to be transporting military equipment and subject to attack. Russia has set hardline terms to renegotiate the deal – regain access for Russian banks in SWIFT and freedom to export ag machinery.
- UPS Strike
- Negotiations continue between United Parcel Service (UPS) and the International Brotherhood of Teamsters on a new labor contract that covers about 340,000 workers (expiration date of July 31.) The strike potential has broad economic implications, with UPS handling roughly 28% of the 75 million packages delivered in the U.S. on a typical day, roughly split equally between businesses and homes.
- Extreme Heat
- Globally, June was the hottest June over the past 174-years of records and July has been a scorcher thus far. Iowa is expected to experience 100+ degree temperatures this coming week
- BRIC Bloc Gold-Backed Currency
- Russia has announced the BRICS Bloc – Brazil, Russia, India, China and South Africa – will create a gold backed trading current. It could be announced at the BRICS Summit on August 22 in South Africa. “De-dollarizing” trade – which would take time to develop – is a goal of BRICS, but more urgent for Russia. Putin will not be at the summit due to risk of arrest by the International Criminal Court in the Hague. If BRICS can pull off the new currency, its bullish gold and bearish the $USD.
- Food Price Outlook
- USDA will releases its food price outlook this week factoring in recent inflation data as well as a forecast of both the Consumer and Producer Price Indices for food.
The Week Ahead
- July 24 Chicago Fed National Activity Index, USDA Grain Inspections and Crop Progress
- This Week House of Representatives panel will hold a hearing to consider legislation to speed up the adoption of self-driving cars. The hearing titled “Self-Driving Vehicle Legislative Framework: Enhancing Safety, Improving Lives and Mobility, and Beating China.”
- July 25 M2 Report. Archer Daniels Midland earnings report, Consumer Confidence; several “big tech” earnings reports (Microsoft, Alphabet, Visa), USDA Cold Storage
- July 26 FOMC Rate Decision (2pm EST) (25bps hike to 5.25% to 5.50% expected), LSB Industries earnings report, New Resident Home Sales, Weekly Ethanol Sales
- July 27 Gross Domestic Product 1st Release (+1.4% expected), Initial Jobless Claims, Pending Home Sales Index; USDA Export Sales and Food Price Outlook
- July 28 Earnings: AGCO, CNH Industrial, Core Personal Consumption Expenditures (PCE) for June (+4.2% expected)
- Week of Aug 1 Earnings: Andersons, Bunge, CF Industries, Corteva, FMC, Green Plains Energy, Mosaic, Nutrien, Mosaic, Scott Miracle Gro, Trimble
- Week of Aug 8 Earnings: AMVAC, Darling Ingredients, Israel Chemical
Cash Commodity Performance
Last week Orange Juice, Natural Gas and Hard Red Wheat dominated the leader board with gains of 7% to 10%. Pork Cutout and Cotton rounded out the “top five” with gains of 3% to 4%. Coffee, Soybeans, Corn and Feeder Cattle were flat to down 3%.
Source: Barchart
Numbers of Interest
650,000 The number of workers that are on strike or who have threatened to strike this summer (supposedly the highest number since the 1970s).
670 # of shale oil & gas drilling rigs currently in operation in the US, down from 800 earlier in 2023.
10 The number of consecutive trading sessions that the Dow Jones Industrial Average has posted gains
$9.4 Trillion Assets Under Management for Blackrock
$929 Billion Annual interest payments on the Federal Debt as of January 1, 2023 (before the last round of interest rate hikes), versus $603 billion a year ago.
9% to 35% A Government Accountability Office analysis for 1Q 2023 found that utilization of USDA headquarters office space is only 9%. Utilization is higher (at 35% for other departments, namely Treasury, State, Justice, Homeland Security, and Commerce.
Kenneth Scott Zuckerberg is Lead Industry Analyst, Farm Supply & Biofuels, CoBank.
