By: Arlan Suderman, Chief Commodities Economist
August 19 – Stock futures were quietly mixed for much of the night. Two wars continue to weigh on investor sentiment, but the economy continues to push forward. Treasury yields pulled back a bit overnight, but the trend remains higher. Yet, the VIX continues to trade near 15 this morning, which is a relatively low level reflecting a sense of complacency. The dollar index is trading near at an 11-week low near 99.0 as it slips lower in recent days, helping to offset a slow rise in commodity prices. Yields on 10-year Treasuries are trading near 4.64% after hitting fresh 19-month highs yesterday, while yields on 2-year Treasuries are trading near 4.17%. WTI crude oil is trading near $85, while Brent trades near $91 per barrel this morning.
The United Arab Emirates is a good ally to the United States, but Dubai – one of its prime cities – is also one of Iran’s most critical economic lifelines. At least it has been until now. UAE became the target of Iranian strikes, along with several other Gulf States. However, Iranian strikes on it halted in May while continuing to persist for its neighbors Kuwait and Bahrain. Even so, Iranian strikes did continue to hit ships connected with the transport of UAE oil. Things changed this week when the UAE accused Iran of firing two ballistic missiles its way. Neither hit land, but rather they landed in the sea. Yet, the UAE declared that it was suspending all financial and economic transactions with Iran until further notice due to what it called Iran’s military escalation that included the missile threat. It’s believed that this will provide a significant financial blow to Iran’s ability to manage its revenue flow. My speculation is that this may be part of President Trump’s bigger package he stated last week would be coming this week that would further isolate Iran economically. This is one of the ways to cut off funding for Iran. The U.S. blockade shuts off Iran’s ability to sell oil, and the UAE’s sever of ties hurts its ability to manage its money flow. It’s speculation on my part that the UAE’s actions may be part of the Trump plan, but it will still have an impact, even if it is coincidental.
President Trump announced a three-day pause on the new 50% tariffs on Canada that were set to go into effect at midnight last night. The tariffs were expected to impact a broad range of products, including many that are currently covered under the USMCA trade agreement. Trump stated that the two countries had reached a deal. Canadian Prime Minister Mark Carney released a statement an hour later stating that “substantial progress had been made, although there is important work still to be done.” The three-day pause allows that work to be done. Trump posted on his social media account that he paused the tariffs “based on the fact that Canada and the U.S.A., subject to the finalization of documents, have a DEAL.” U.S. Trade Representative Jamieson Greer’s office confirmed that the deal would be good for all American goods, economic security commitments, and digital trade alignment. There’s a lot that could be included in those terms. I’m anticipating that those terms include trade in autos, dairy, and also likely Chinese transshipments through Canada. Trump also commented on social media that the Keystone XL pipeline “may be awoken from the grave” without giving any more details. The deal could provide a big step toward a new USMCA trade agreement if the above proves true in the days ahead, since the United States was already well on its way in negotiating with Mexico.
Neighboring Moldova threw Ukraine a lifeline by offering to provide a 50% discount on transit rail freight through the end of the year. This makes it more economical to transport Ukraine grain to its port at Reni, which is located on the Danube River in southwestern Ukraine near the borders of Romania and Moldova. The high tariffs had previously led to transporting grain to Izmail, but low waters on the Danube were making transporting the grain from that point difficult. The Moldova route is still more expensive than exporting via Ukraine’s Odessa ports, but it makes it a bit more feasible. Even so, Reni is not immune to Russian strikes either, although such strikes risk impacting NATO member Romania. This leaves road and rail transportation of grain into Europe as the primary option for Ukraine exports. That’s an option that Russia does not have, but it still remains a somewhat limited option, although perhaps a bigger option this year since severe drought hit Europe’s crops this year.
Day #2 of the Pro farmer Midwest Crop Tour was disappointing. Day #1 was expected to have the worst of this year’s results, but those results were expected to show a notable improvement in Day #2, with the best results in the final two days. The western leg of the tour will focus more on northwestern Iowa today, which is a pocket that missed a lot of rains. Keep in mind that the tour typically comes in lower than USDA in its corn numbers, but these numbers are still low enough to raise some concerns. As such, market participants will need to see some significant improvements in yield potential from today and tomorrow’s results. That’s because USDA dropped its 2026-27 corn ending stocks estimate to 1.653 billion bushels or 10.1% of expected usage. That leaves little margin for error additional yield loss on the supply side of the balance sheet.
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Black Sea export revenue has collapsed and the pressure is landing on next season's winter wheat and rapeseed planting. Falling farm income, rising freight costs, Russian state support measures and European dryness now shape the acreage decision more than the war headlines do.
August 19 – Stock futures were quietly mixed for much of the night. Two wars continue to weigh on investor sentiment, but the economy continues to push forward. Treasury yields pulled back a bit overnight, but the trend remains higher. Yet, the VIX continues to trade near 15 this morning, which is a relatively low level reflecting a sense of complacency. The dollar index is trading near at an 11-week low near 99.0 as it slips lower in recent days, helping to offset a slow rise in commodity prices. Yields on 10-year Treasuries are trading near 4.64% after hitting fresh 19-month highs yesterday, while yields on 2-year Treasuries are trading near 4.17%. WTI crude oil is trading near $85, while Brent trades near $91 per barrel this morning.
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.
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