April 15 – It’s “Tax Day” in the United States – which is the deadline for filing income tax returns. Stock futures were generally weaker overnight as investors balanced favorable earnings reports with fears that the current tariff war will eventually negate that positive news. Yet, the VIX is trading just above 30 this morning, after briefly probing below it overnight. It’s been my observation over the past several decades that it is difficult for any commodity to sustain a rally when the VIX is above 30, unless that asset has a strong story of its own. The VIX spiked above 60 on April 7, but it has since been trending lower to retest that 30 level once again. The dollar index is trading near 99.9 this morning. Yields on 10-year Treasuries are trading near 4.38%, while yields on 2-year Treasuries are trading near 3.85%. Crude oil prices are again under modest pressure this morning, following stock futures lower, as they trade near $61 per barrel. The grain and oilseed markets were mixed to lower in overnight trade.
Earnings beats by Citigroup and Wells Fargo were certainly a positive for Wall Street, but they were also dismissed as representative of conditions in the first quarter of this year, prior to President Trump announcing his reciprocal tariff plan. The stock market plummeted in the initial days after that announcement as it priced in a tremendous amount of fear, perpetuated by a steady flow of headlines predicting catastrophe. The major stock indices traded 13 to 16% off of their April 2 close in the days that followed Trump’s tariff announcement, largely on that fear factor. After all, the markets don’t trade today’s developments as much as they trade the anticipated future developments. We’ve seen a rebound in the major stock indices to the point where they were each down 4 – 5% from their April 2 close when I checked this morning as investors wait for hard data to back up the economic fears previously priced into the market. Those fears eased somewhat when President Trump announced his 90-day “pause” on the reciprocal tariffs for those nations that had offered to negotiate rather than to retaliate.
The White House now says that 130 countries are in various stages of those negotiations. Wall Street is currently giving the White House some grace to wait for the results of those negotiations, but its patience has a timeline. The White House needs to announce some solid deals with major trading partners such as Japan and/or South Korea soon to buy more time for additional negotiations. The markets priced in the worst-case scenario the first several days after the tariff announcement, which included expectations of global recession. A best-case scenario would be a world where all tariffs are negotiated down to zero. That’s not likely to happen, but there is a middle ground that would please the markets, where economic growth and expansion would increase demand for commodities, and that’s what investors want to see develop in the weeks ahead.
China’s stock market was quietly mixed today as investors there wait for word of a start of negotiations between its leaders and those of the United States. Thus far all is quiet on that front. Investors continue to expect significant stimulus from the government to help the Chinese economy weather the storm of the tariff war, but thus far no significant plans to boost domestic consumption have been announced. The authorities are rolling out measures to help export businesses hit by the tariffs to pivot to the domestic market, but thus far there’s been little to stimulate consumer buying other than what had already been in place in recent months. China’s Ministry of Commerce plans to launch more featured shopping campaigns and consumer product expos to encourage consumer spending, but nothing has been done yet to increase income and/or expectations of such. China did see a surge in exports in March as buyers tried to beat the tariffs with their purchases, but imports were sluggish, suggesting slow consumer demand. Consumer sentiment remains near record lows in China.
Rainfall in Center-West Brazil, where the bulk of its safrinha corn crop is grown, has been among the lowest of the past 45 years for the period, but the rains have been timely. Rains have certainly been better in Mato Grosso than they have been to the east and south of there, but timely rains have thus far preserved the crop as it moves into the critical pollination phase. Satellite-based NDVI scores are not a perfect indicator of yield potential, but they do provide some sense of the health of the crop. The latest weighted NDVI data for Mato Grosso, Mato Grosso do Sul, Goias, and Parana, which accounts for roughly 85% of the safrinha crop, are higher than they’ve been at any point in mid-April since 2001. That would suggest that the current crop health is good, although I’m sure there are pockets where that is not the case, as is typically the case. Nonetheless, the crop needs to see ongoing timely rains into May to sustain that production potential. Farmer selling of soybeans and corn is picking up as a result. In fact, our cash sources believe that 70 cargoes of soybeans were sold on the export market last week alone, which would be a record weekly total if it verifies. Further north, the opportunity exists for some good rains to fall in dry areas of the central and southern Plains this weekend. Those rains will be critical for the hard red winter wheat crop if they occur.
