Perspective: Morning Commentary September 18

By: Arlan Suderman, Chief Commodities Economist

Thu, 18 Sept 2025, 13:34

Today's Perspective Video: China's Soybean Pivot Raises Questions for U.S. Agriculture

September 18 – Stock futures pointed higher overnight after Wall Street got what it wanted from the Federal Reserve on Wednesday afternoon. Overnight trade suggests that new record highs may be in the works today. The VIX dropped to trade either side of 15 this morning, while the dollar index bounced to trade near 97.3 after falling to its lowest level since February 2022 on Wednesday near 96.2. Yields on 10-year Treasuries rallied to trade near 4.12% this morning, while yields on 2-year Treasuries are trading near 3.58%. Crude oil prices rose modestly on the rate cut stimulus, but gains were limited by rising OPEC+ supplies combined with lingering worries about the health of the economy. The grain and oilseed markets had a mixed to weaker tone overnight.

Wall Street leaned heavily dovish going into yesterday’s decision from the Federal Open Market Committee, and the Fed did little to alter that sentiment ahead of its meeting. As such, confidence was high that the Fed would deliver on Wall Street expectations, and it did. The Federal Reserve cut its benchmark interest rate by 25 basis points on Wednesday, while signaling that it will likely do so a couple of more times before the end of the year. Stephen Miran, President Trump’s recently appointed governor, was the lone dissenting vote Wednesday because he argued for a 50-basis-point cut. The Fed acknowledged that inflation remains near 3%, well above its 2% mandate, but it worries about the softening job market.

The Fed continues to forecast that we will get back to that 2% mandated level three years from now, just as it has promised for much of the past several years. Wednesday’s rate cut was justified by concerns about the jobs sector, but the Fed’s own projections show the job market strengthening next year, while inflation levels were revised upward. Yet, Fed Chair Jerome Powell called yesterday’s rate cut a “risk management cut.” I find it interesting that Powell confessed that, “No one really knows where the economy will be in three years.” Perhaps he needs more business leaders on the FOMC. As such, the Fed failed to deliver on one market expectation – promises of four to five rate cuts over the next year. The famous dot plot graphic reflecting rate expectations of the various FOMC members has one of the widest spreads in history for 2026 & 2027. That suggests that more cuts could come if the labor market remains soft, but we could also see rates rebound if the jobs market strengthens again.

President Trump is expected to have a phone call with Chinese President Xi tomorrow. The very fact that the two heads of state will be talking opens the door to a chance that we could see some movement in the commodity sector, although China will likely want to hear the U.S. Supreme Court rule on the legality of Trump’s tariffs before giving away too much in negotiations. Meanwhile, China continues to face its own set of economic problems that have been amplified by the trade war. China’s youth unemployment for those age 16 to 24 hit 18.9% in August, up from 17.8% in July, and slightly above the 18.8% posted the previous year. A high youth unemployment rate leads to low incentives for marriage and childbirth, further complicating China’s efforts to reverse its problem with an aging and shrinking population. But fixing the unemployment problem is challenging when the government is also trying to get a handle on its overcapacity problem. It’s car production capacity – especially for electric vehicles – is twice demand levels, leading companies to dump cars onto the market below $10K per vehicle at times. It’s facing a similar problem for solar panel production, and now we can add shipbuilding to the list. Chinese authorities stepped up controls recently to avoid an oversupply of ships following U.S. actions to attach port fees on ships that were made in China when they enter U.S. ports. Chinese shipyards currently hold a 70% share of global shipbuilding capacity, with 75% of that currently in use to build existing ship orders. However, new orders are shifting to other sources as shipping lines try to avoid the new U.S. port fees on Chinese made ships. All of this increases the challenges for China to keep its vast population employed, creating more downside pressure on property prices, and worsening consumer confidence within China. Authorities continue to increase stimulus via government bond issuance, with China’s debt to GDP ratio now approaching 100%, although that’s still below U.S. levels near 124%.

December corn continues to fail any attempts to sustain a move above $4.30 per bushel, as farmer selling – both here and in Brazil – picks up each time that the contract reaches that level. This increases the significance of the $4.30 level for chart watchers. Declining soyoil prices are weighing on soybean prices as harvest picks up momentum with traders disappointed that we’ll likely not have clarity on our biofuel program until late November or December, limiting biomass diesel production in the meantime. Wheat prices continue to find good demand on weakness but rallies also get sold as they quickly price us out of the world market. A weaker dollar benefits both corn and wheat on the export front, but traders know that sustaining a rally in the current environment can also quickly send customers elsewhere. Cheap prices build demand, but we have to sustain that demand for a while.

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Matt ZellerWed, 05 Aug 2026, 12:39

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Matt ZellerTue, 04 Aug 2026, 12:43

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Mike CastleMon, 03 Aug 2026, 15:10

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