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Perspective: Morning Commentary for August 18

By: Arlan Suderman, Chief Commodities Economist

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August 18 – Stock futures continued to leak lower overnight amid escalating tensions on two war fronts, and as Treasury yields push higher. The VIX inched higher to trade near 16 as well, although that is still relatively low. Even so, it is firming. The dollar index is trading near 99.6 as investors assess Japan’s financial stability. Yields on 10-year Treasuries are trading near 4.74% at this hour, after posting a fresh 19-month high this morning, while yields on 2-year Treasuries are trading near 4.20%. WTI crude oil is trading near $85, while Brent trades near $91 per barrel. The grain and oilseed markets are firmer this morning, garnering support from solid demand, more yet unconfirmed reports of hits on grain boats in the Black Sea, and amid crop tour results that put some doubts on the size of this year’s crops.

The war in the Middle East slowly drifts toward escalation as Iran periodically hits boats in the Strait of Hormuz, the Iran-backed Houthis do the same in the Bab el-Mandeb Strait, Iran threatens to take the offensive and President Trump rejects extending the Memorandum of Understanding that never meant much in the first place. Yet, crude oil flows through the Strait of Hormuz appear to be increasing. Prices are slowly rising on the escalation, but the scope of the gains are thus far contained due to these reports of increased oil flow via dark vessels. Iran tries to hit them as it can, but they’re still getting through. They’re not showing up in most of the reports, but oil is flowing. Not enough to meet the world’s needs, but an increasing pace. Saudi Arabia has even resumed loading tankers inside the Persian Gulf again, with more tankers waiting to load. This increased effort to export oil via the Persian Gulf comes as the Houthi’s step up their attacks on ships and infrastructure on the Red Sea side of the Saudi peninsula. Nonetheless, the Iranian Revolutionary Guard would like nothing better than to see energy prices soar once again ahead of the U.S. midterm elections, leading to their recent threats to take the offensive. Iran threatened to militarily blow through the U.S. blockade of its ports that is clamping down on Iranian revenues, although it is yet to be seen just how it might be able to accomplish that. Even so, the risk must be respected.

Escalation in the Black Sea war remains a factor for the commodities as well. Both Russia and Ukraine continue to strike at the other’s ability to export commodities. For Ukraine, it’s been focused heavily on Russia’s infrastructure and ability to export energy, while recently adding grain export capacity to that as well. That’s one of the primary reasons why U.S. diesel prices are so high. With Russia no longer able to export diesel – was #2 exporter in the world – buyers are turning to the United States. U.S. diesel exports recently hit record high levels near 1.9 million barrels per day earlier this month as world buyers bid product away from U.S. domestic customers. Ukrainian hits on Russia’s wheat export capacity have cut its exports in more than half thus far, with more unconfirmed reports of wheat boats being hit near its Black Sea ports today. For Russia, it’s focusing primarily on Ukraine’s ability to export corn, wheat, and other food-based products. Those strikes have essentially shut down its three main ports, while it has also demonstrated its ability to shut down other options on the Danube River. Ukraine can still move some products into Europe via land routes, albeit with some obstacles. Momentum in this war continues to be one of escalation toward more limited commodity movement out of this key export region.

Yields on 10-year Treasuries rallied to fresh 19-month highs this morning, following somewhat of a global trend toward higher rates. Inflation is being blamed, and that is a factor, but that would be more of a factor for the shorter end of the yield curve, and we’re seeing less upward pressure there. Other factors for the mid- to longer end of the curve would include massive investments in AI, with companies racing to pay higher rates if necessary to avoid falling behind the competition in the AI race, along with growing sovereign debt – here and overseas. But concerns regarding Japan are also likely a factor, amid fears that it may need to unload more holdings of U.S. debt at a time when the supply of debt certificates is already high due to our growing sovereign debt. Yields need to rise to keep demand for those certificates matched to the supply.

Day one of the Pro Farmer Midwest crop tour highlighted the effects of drought on the western leg and excess water on the eastern leg of the tour. To be sure, the problems are real. But they’re also not the whole story. This year’s tour will see the worst of the crop in day one and the best of the crop in days three and four. Pro Farmer states that they focus on Illinois, Indiana, Iowa, Minnesota, Nebraska, Ohio, and South Dakota, with those states accounting for 70% of the nation’s corn production. But the routes only hit small portions of some states. For example, the routes missed the good corn in southern Ohio. To be fair, the routes were created years ago, before the Corn Belt expanded, and they need to maintain them to maintain consistency of analysis. But it also requires that we reserve judgement until a full understanding of the crop is reached.   

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This material should be construed as market commentary and represents the opinions and viewpoints of the author, and does not reflect tailored advice associated with any specific account.


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Perspective: Morning Commentary for August 18

August 18 – Stock futures continued to leak lower overnight amid escalating tensions on two war fronts, and as Treasury yields push higher. The VIX inched higher to trade near 16 as well, although that is still relatively low. Even so, it is firming. The dollar index is trading near 99.6 as investors assess Japan’s financial stability. Yields on 10-year Treasuries are trading near 4.74% at this hour, after posting a fresh 19-month high this morning, while yields on 2-year Treasuries are trading near 4.20%. WTI crude oil is trading near $85, while Brent trades near $91 per barrel. The grain and oilseed markets are firmer this morning, garnering support from solid demand, more yet unconfirmed reports of hits on grain boats in the Black Sea, and amid crop tour results that put some doubts on the size of this year’s crops.

Arlan Suderman
Arlan Suderman
  • Grains & Oilseeds
  • Energy
  • Dairy
  • Renewable Fuels
  • Cocoa
  • Coffee
  • Cotton
  • Sugar
  • Meats & Livestock
  • Forest Products

Perspective: Morning Commentary for August 17a

August 17 – The tech sector firmed overnight, while the other sectors were quietly mixed as the status quo continues in both the Middle East and the Black Sea. That status quo is slow escalation, creating more risk for commodities. The commodity markets are becoming a bit more headline sensitive once again, focused on the two wars, while the equities remain resilient overall. The VIX is trading near 15 this morning, after setting fresh 2026 lows last week just below that. The dollar index is trading near 99.4. Yields on 10-year Treasuries are trading near 4.71%, while yields on 2-year Treasuries are trading near 4.19%, WTI crude oil is trading near $83 per barrel, while Brent trades near $89 per barrel. Wheat prices pulled back overnight, while corn and soybean prices posted gains.

Arlan Suderman
Arlan Suderman
  • Grains & Oilseeds
  • Energy
  • Dairy
  • Renewable Fuels
  • Cocoa
  • Coffee
  • Cotton
  • Sugar
  • Meats & Livestock
  • Forest Products

Perspective: Morning Commentary for August 17

August 17 – The tech sector firmed overnight, while the other sectors were quietly mixed as the status quo continues in both the Middle East and the Black Sea. That status quo is slow escalation, creating more risk for commodities. The commodity markets are becoming a bit more headline sensitive once again, focused on the two wars, while the equities remain resilient overall. The VIX is trading near 15 this morning, after setting fresh 2026 lows last week just below that. The dollar index is trading near 99.4. Yields on 10-year Treasuries are trading near 4.71%, while yields on 2-year Treasuries are trading near 4.19%, WTI crude oil is trading near $83 per barrel, while Brent trades near $89 per barrel. Wheat prices pulled back overnight, while corn and soybean prices posted gains.

Arlan Suderman
Arlan Suderman
  • Grains & Oilseeds
  • Energy
  • Dairy
  • Renewable Fuels
  • Cocoa
  • Coffee
  • Cotton
  • Sugar
  • Meats & Livestock
  • Forest Products
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