Canada Know-Risk Weekly Agricultural Market Update 9-18-26
Canada Know-Risk Weekly Agricultural Market Update 9-18-26
Jason Labossiere
- Grains & Oilseeds
Perspective: Morning Commentary for September 18
By: Arlan Suderman, Chief Commodities Economist
September 18 – Stock futures were firm and commodity prices initially again weaker this morning as Wall Street prepares for another weekend when the headlines will continue to flow while the markets are closed. Commodity weakness ahead of the weekend fits a recent pattern for Friday trade. Global energy deficit fears continue to ease as we head into the weekend as Saudi Arabia partially restores flow along its east-west pipeline, and flow through the Strait of Hormuz may be improving. In fact, some reports suggest that ship-to-ship transfers may be moving more than 7 million barrels a day now out of the Gulf, with that number continuing to rise. Global central banks are attacking inflation, although questions remain regarding the effectiveness of those efforts amid high energy prices. Even so, the VIX is back to trading near 15, even as the dollar index and Treasury yields trend higher. The dollar index is trading near 100.4 after hitting a fresh seven-week high. Yields on 10-year Treasuries are trading near 4.98%, while yields on 2-year Treasuries are trading near 4.73%, as we’ve recently seen a dramatic flattening of the yield curve. WTI crude oil is trading near $103 per barrel, while Brent trades near $104. The grain and oilseed complex was broadly weaker in overnight trade.
The biggest problem facing President Donald Trump and the Republicans headed into the November midterm elections is high diesel and gasoline prices. Russia was the number two exporter of diesel prior to Ukrainian attacks on its refineries that turned it into an importer, although Middle East locations combined exceeded that total. The combination has the world leaning on diesel imports from China, India and the United States, with Russia now an importer of diesel from India and/or China. The four-week average for U.S. diesel exports is up 32% year-on-year as a result. Those profit opportunities for exporting diesel have refiners leaning into diesel production over gasoline. As a result, U.S. commercial gas inventories are running roughly 5% below the five-year average for mid-September; not running out like a local social media post I spotted stated. Nonetheless, that deficit is enough to elevate gas prices while diesel prices hit record highs. We have plenty of crude oil to refine in this country, but we haven’t built a refinery in more than a half-century, leaving us vulnerable when a refinery has to shut down for maintenance. Iran is hoping that those high prices result in the Democrats taking a majority in the House and Senate, resulting in the removal of Trump’s ability to wage war against it – one way or the other. China doesn’t mind those high U.S. prices either, which may be why it has stepped up oil purchase on the global market as well.
President Xi is scheduled to visit the United States to meet with President Trump next Thursday. I fully expect that meeting to occur short of something unexpected happening. I’ve been asked many times by media whether I think that the meeting will happen, and my response is, “Of course.” Both leaders have too much to lose from the meeting not happening. Both leaders need concessions out of the other, and both have issues that need addressed. There’s a full plate of issues that will need to be addressed, making this perhaps the most complicated of the past decade. On the table are rare earth minerals, high tech chips, Taiwan, Iran, Ukraine, the Indo-Pacific, access to the vast U.S. consumer market, exports of U.S. Ag commodities, regulations on AI as used by defense to prevent an “accidental” war between the two powers, and a plethora of other issues. The bad news is that the two countries have vastly different value systems and objectives. The good news is that both leaders recognize that the two countries need to find areas of common ground to coexist amid their differences. They both respect the other’s strong leadership, and they have actually built a relationship of trust over the years that will aid in the negotiations. Yes, they will meet.
The two wars are getting a bit more complex in nature. The U.S. State Department posted on its site yesterday that it has approved a $24.3 billion sale to Saudi Arabia of F-35 Lightning II Joint Strike Fighter aircraft. Saudi Arabia has been reportedly begging the United States to help it fight off the Iran-backed Houthi rebels. This sale when completed will help Saudi Arabia to be more of a force for peace as an ally in the Middle East. The Saudi government also reportedly asked China to pressure Iran to reign in the Houthi’s, which China reportedly has spoken to Iran about. On another front, President Trump posted on social media on Thursday that he was making good progress in discussions with Polish President Karol Nawrocki toward the objective of building an alliance that would allow the United States to establish an army base in Poland. That gives Trump more leverage over Russia. From Russia’s perspective, Moscow has been attacked 50 times over the centuries by foreign forces – generally from the west. It was most secure when its borders reached the European mountains, which is likely President Putin’s objective – not just stopping with Ukraine. A U.S. army base in Poland would help to deter that aggression, although he will also see it as evidence in his mind that NATO wants to attack him. Yet, he also knows that he cannot go up against the U.S. military. Either way, I do not see either war being settled any time soon, although I do see signs that the economic squeeze currently being put on Iran is weakening the Iranian threat somewhat.
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Perspective: Morning Commentary for September 18
September 18 – Stock futures were firm and commodity prices initially again weaker this morning as Wall Street prepares for another weekend when the headlines will continue to flow while the markets are closed. Commodity weakness ahead of the weekend fits a recent pattern for Friday trade. Global energy deficit fears continue to ease as we head into the weekend as Saudi Arabia partially restores flow along its east-west pipeline, and flow through the Strait of Hormuz may be improving. In fact, some reports suggest that ship-to-ship transfers may be moving more than 7 million barrels a day now out of the Gulf, with that number continuing to rise. Global central banks are attacking inflation, although questions remain regarding the effectiveness of those efforts amid high energy prices.
Arlan Suderman
- Grains & Oilseeds
- Energy
- Dairy
- Renewable Fuels
- Cocoa
- Coffee
- Cotton
- Sugar
- Meats & Livestock
- Forest Products
Perspective: Morning Commentary for September 17
September 17 – The Fed delivered a 25-basis point rate hike as expected yesterday, bringing their benchmark range to 3.75% - 4.00%. This is officially the first rate hike by the Fed in more than three years, dating back to July 2023. The market was pricing in near certain expectations of such a hike in the lead-up, leading to a relatively muted reaction in the trading that followed, though the Dow Jones and S&P 500 did both finish yesterday in the red. They’re looking to rebound to kick off trade this morning, however, with stock futures pointing to a notably stronger open across the board while the VIX is sharply lower, falling below 15.5 for the first time since last Tuesday. The dollar is in the red to start the day after pushing to a fresh six-week high of 100.35 yesterday, currently trading near 100.11 at the time of writing. Treasury yields are notably lower, particularly at the front-end of the curve, with 2-year yields back to 4.675%, 10-year yields at 4.949%, and 30-year yields at 5.307%. Crude oil is starting the day in the red, with nearby WTI down 1.9% to trade just above $100 at the time of writing, while nearby Brent is down a further 3.6% to trade near $102. Meanwhile, the ags are looking at a mostly lower open.
Mike Castle
- Grains & Oilseeds
- Energy
- Dairy
- Renewable Fuels
- Cocoa
- Coffee
- Cotton
- Sugar
- Meats & Livestock
- Forest Products
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