Perspective: Mid-Day Commentary for October 29

By: Arlan Suderman, Chief Commodities Economist

Wed, 29 Oct 2025, 14:56

Today's Perspective Video: Are We On the Cusp of a China Trade Deal?

October 29 - Nvidia topped a $5 trillion valuation today, helping boost the major stock indices to fresh record highs ahead of this afternoon's anticipated rate cut by the Federal Reserve, and ahead of tomorrow's anticipated trade deal signing with China. Yet, the VIX inched higher to trade near 17 in early trade, while the dollar index is trading near 98.8. Yields on 10-year Treasuries are trading near 3.99%, while yields on 2-year Treasuries are trading near 3.50%. Crude oil prices are nearly 1% higher mid-morning, while the grain and oilseed markets are quietly mixed today.

Tonight's trade deal signing with President Xi of China is expected to focus on fentanyl and soybeans. President Trump is expected to cut his 20% fentanyl tariff in half in exchange for China further restricting the export of the key components used to produce the drug. There's also an expectation that China will agree to purchase 30 - 50 million metric tons of U.S. soybeans over a three-year period. Chinese purchases of U.S. soybeans peaked at 33.7 mmt in calendar year 2016. They hit a low of 16.6 mmt in calendar year 2018 due to a combination of the first Trump trade war and due to the devastation of its hog herd by African Swine Fever. It rebounded to 32.3 mmt in calendar year 2021, but it has been in decline ever since, falling to just 16.8 mmt in the current calendar year. Each 1 mmt equals 36.74 million bushels of soybeans. Meanwhile, Chinese investment in Brazil agriculture has steadily increased its dependence on supplies from that nation over the past 20 years. Chinese buying of Brazilian soybeans totaled just 11.6 mmt in calendar year 2006, but it has steadily grown to a high of 74.6 mmt in calendar year 2024, accelerating as Brazil's real lost value making Brazilian soybeans cheaper to purchase.

Let's take the top end of that rumor about this week's agreement - 50 mmt. Let's assume that China buys 10 mmt over the next two months to fill what Brazil is unable to do this year. (Next year's crop is expected to be 10 mmt larger.) Then let's assume that it buys 20 mmt in each of the next two years. That's pretty disappointing relative to recent years, but it's probably 50 mmt of business that we were not going to get. Furthermore, it's probably enough to stimulate the need to expand soybean acreage next year, considering the growth in domestic demand based on the anticipated final rules for the biofuel program. I've said for years that China's appetite for U.S. soybeans was going away. That's been one of the big focuses of developing the biofuel program here in the States - to replace that business. The biofuel program isn't quite developed enough yet this year to replace that Chinese business, but it could be a few years from now. Such a trade deal with China as rumored above could help fill that gap if it happens. Of course, the primary problem may be enforcement. China only bought 58% of what it committed to buy in the Phase One agreement during Trump 1.0. Meanwhile, it's bearish for Brazil soybean demand.

Receiving little talk is grain sorghum. Plains farmers desperately need China to buy better than 3 mmt of U.S. grain sorghum sitting in piles and bins after this year's big harvest. It's been well over a year since China made any note worthy purchases of U.S. grain sorghum. USDA forecasts grain sorghum exports at 225 million bushels in the current marketing year, but exports only totaled 95 million bushels in the absence of Chinese purchases last year. That has industry leaders questioning where that demand will come from?

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