Perspective: Mid-Day Commentary for May 23

By: Arlan Suderman, Chief Commodities Economist

Fri, 23 May 2025, 16:41

Perspective: Mid-Day Commentary

Arlan Suderman

Chief Commodities Economist

May 23 - Stocks remain under pressure heading into the three-day holiday weekend, with the markets closed on Monday for the Memorial Day holiday. The pressure comes from this morning's threats of 25% tariffs on Apple iPhones not produced, but sold, here in the United States, and on the president's recommendation to place a 50% tariff on all goods coming from the European Union effective June 1. However, stocks have slowly firmed off their session lows to now trade closer to their session highs, while still remaining in negative territory. Nonetheless, traders worry that the headlines will continue to flow out of the White House through the holiday period when the markets are closed. As such, the VIX remains elevated as it trades near 22, while the dollar index is trading near 99.2. Yields on 10-year Treasuries are trading near 4.51%, while yields on 2-year Treasuries are trading near 3.99%. Crude oil prices erased their early losses to trade modestly higher at midday, while the grain and oilseed sector is mixed to weaker.

Corn and soybean prices came under pressure when President Trump announced his 50% tariff on the European Union to leverage them into negotiating in "good faith." We saw active selling in crude oil and in the equities at that point as well. Those other markets have done a better job of recovering since then than have the corn and soybean markets. We exported 5.57 million metric tons of soybeans (205 million bushels) to the EU in calendar year 2024, along with 1.91 mmt of corn (75 million bushels) and 568,247 MT of soymeal. Those aren't balance sheet breakers, but it could be lost demand nonetheless. The assumption is that the EU would put retaliatory tariffs on those commodities, although we do not yet know that. Doing so would mean that the EU would need to go to another source to get those products, if it needs them, which would displace another customer, who would likely end up coming here. Nonetheless, it was negative heading into the holiday weekend. Wheat prices rallied sharply following the posting of lower crop ratings Monday afternoon, with the buying largely being end user buying and speculative short covering. The speculative community was very uncomfortably short wheat going into Monday's report. We saw a very strong export sales report for wheat on Thursday, but sustaining this rally would likely curtail additional export business. As such, buying dried up to end the week, leaving wheat prices soft going into the weekend.

President Trump is on a mission to lower trade imbalances by lowering global tariffs and non-tariff trade restrictions. He has to operate fast, assuming that he may lose the Congress in the mid-term elections, and with that his authority to act. As such, he actions have appeared chaotic at times, throwing a lot at the markets, and at the consumer, at the same time. His greatest risk is losing the consumer, and therefore the voter, resulting in a slowdown in the economy, and loss of political leverage to continue his tariff battle. The University of Michigan's latest consumer survey reflecting expectations that inflation will surge to over 7% over the coming year due to the constant bombardment of news stories that tariffs create inflation. They do result in higher prices, although not likely to that level. But perception is reality to the consumer, and those fears can end up slowing consumer buying, resulting in a self-fulfilling recession.

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