By: Arlan Suderman, Chief Commodities Economist
February 10 – The Nikkei hit new record highs today, leading other Asian shares higher as well, in follow through buying after the Liberal Democratic Party of Japan won a sweeping victory over the weekend, supporting increased spending for national defense, as well as tax cuts. That initially provided tailwinds for U.S. stocks as well, before modest selling returned ahead of today’s retail sales data, and tomorrow’s jobs data. The VIX is trading near 17 this morning, while the dollar index trades near 96.8 as Japanese investors pull their money back home. Yields on 10-year Treasuries are trading near 4.16%, while yields on 2-year Treasuries are trading near 3.46%. Crude oil prices are modestly higher, while the grain and oilseed markets traded quietly mixed to higher ahead of today’s USDA WASDE crop report.
U.S. Treasury Secretary Scott Bessent stated Monday that he had a team in China last week helping to “strengthen the channels of communication” between Beijing and Washington. The Trump team knows that the Chinese culture values a relationship of respect. As such, the trade team spoke with their Chinese counterparts literally every day developing relationship during Trump 1.0. Trade talks were relational in nature. Then came four years of silence when the Biden trade team didn’t talk to China at all. That didn’t go over well with the Chinese. Trade talks became transactional in nature. The White House is working to restore the relationship-based trade talks. Secretary Bessent hopes to meet again with Chinese Vice Premier He Lifeng in the weeks ahead as well. A date and time has not yet been made public for that meeting, which will be focused on laying the groundwork for President Trump’s visit to Beijing in April. Bessent last met with He in Malaysia in October when they worked out a framework deal that allowed rare earth minerals to flow once again out of China.
Media reports within China suggest that President Trump is likely to visit Beijing during the first week of April. The fact that a hard date is being discussed provides optimism that U.S. and Chinese negotiators are coming together on a concrete package that they can agree to when the heads of state meet. Observers will now focus on watching for possible details of the agenda for the April meeting to give some clues on the type of deals that might be anticipated. President Trump and President Xi each need something from the other if they’re going to assure that they can continue with their agenda at home longer term. The possibility of China buying another 8 million metric tons of soybeans has already been raised by President Trump. I’ve already covered how that makes little economic sense on its own, but it’s a cheap price to pay if it helps Xi reach an agreement on technology and consumer access that help strengthen his power base at home, enabling him to survive politically. As such, the possibility exists that we could see other commodities involved as well.
Retail sales were flat month-on-month in December, down from 0.6% growth in November, and below analyst expectations of 0.4% growth. Retail sales were up 2.4% year-on-year. Retail sales minus vehicles were also flat in December, down from 0.4% growth in November, and below analyst expectations of 0.4%. Sales minus vehicles and gas were flat as well in December, versus 0.3% growth in November and versus expectations of 0.3% growth. These were delayed numbers for the month of December, but a disappointment nonetheless.
The employment cost index rose 0.7% quarter-on-quarter in the fourth quarter of 2025, down from an 0.8% rise the previous quarter, and below expectations of an 0.8% increase. The employment cost index rose 3.4% year-on-year in the fourth quarter, down from 3.5% the previous quarter, and below expectations of a 3.5% rise. This suggests some cooling of wage inflation pressures during the quarter.
USDA is scheduled to release its February WASDE crop report at Noon Eastern Time today. Soybeans will again be at the forefront of this report – at least traders will be looking for that. Production estimates for Brazil continue to rise as the harvest advances. Only about 15% of the Brazil soybean crop was harvested as of the end of last week, but yields have been good. Our StoneX Brazil customer survey put the crop at 181.6 million metric tons last week, up 4 mmt from the previous month, and up from USDA’s January estimate of 178 mmt. But an increase in Brazil production typically leads to a decrease in U.S. exports, and that creates problems for USDA at a time when the president is talking of more soybean sales to China – possibly another 8 mmt. As such, we may see USDA hold off on making significant changes to the balance sheets this month, especially with the EPA expected to soon weigh in on final biofuel regulations; possibly ahead of the March WASDE report. Nonetheless, that’s where I’ll be looking for potential changes. We also may see a bump in U.S. corn exports, and perhaps wheat as well. But other significant changes are less likely.
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A strong super El Niño has started, but the crop damage that would lift food prices is still expected to land between September and December. Indian wheat area and Southeast Asian palm oil production sit at the front of the transmission chain, with Brazil the larger unresolved question.
Damage to Black Sea ports has stalled grain exports, but the more serious risk is now forming on the farm. Collapsed farmgate prices and a Russian fuel crisis have put part of the wheat harvest in question.
August 13 – The major stock indices traded quietly mixed overnight ahead of this morning’s weekly job numbers and producer price index data. Like Wednesday, this morning’s data was considered good as well, providing support for stocks while generally allowing Treasury yields to slip a bit lower. The VIX is trading near 14.4, which is just above yesterday’s new low for the year. The dollar index is trading near 99.8. Yields on 10-year Treasuries are trading near 4.64%, while yields on 2-year Treasuries are trading near 4.15%. WTI crude oil is trading near $81 per barrel, while Brent trades near $87 per barrel. Wheat prices again firmed overnight on geopolitical risks in the Black Sea Region, while corn and soybean prices pulled back modestly from yesterday’s big gains.
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