Perspective: Morning Commentary October 27

By: Arlan Suderman, Chief Commodities Economist

Mon, 27 Oct 2025, 13:41

Today's Perspective Video: Are We Near a China Trade Deal?

October 27 – It’s day #27 of the partial government shutdown, but all eyes are on weekend developments on the diplomatic front. It was a big weekend for world leaders to meet, and the tone coming out of most of those conversations was positive toward easing trade tensions, including between China and the United States. No hard fast deals have yet been signed, so things could still fall apart. But optimism rules the day, with Ag commodities rising, along with stock futures. In fact, the major stock indices suggest that we could see new record highs today. The VIX is trading at one-month lows below 16 this morning on the easing international tensions and stronger equity values, while the dollar index is trading near 98.8. Yields on 10-year Treasuries firmed to trade near 4.02%, while yields on 2-year Treasuries are trading near 3.51%. Crude oil prices are consolidating following last week’s sharp gains, while soybeans lead the grain and oilseed sector higher on trade deal hopes.

President Trump is scheduled to meet with President Xi of China on Thursday in South Korea. This will be a pivotal meeting for the two world leaders after their respective appointees negotiated the framework for a significant trade deal in Malaysia this past weekend. Details are still lacking, and the whole thing could still fall apart, but there are signs that China is anxious to put tensions with the United States behind it. U.S. Treasury Secretary Bessent stated following the weekend talks that President Trump’s threat of an additional 100% tariff on Chinese goods provided one of the leverage tools needed to jumpstart negotiations, although China also appeared anxious to de-escalate tensions following last week’s Fourth Plenum meeting. President Xi came out of that political convention of the Chinese Communist Party still in power, but he seemed focused on calming the international waters so that he could deal with domestic issues, not even wanting to wait to hear the U.S. Supreme Court decision next month regarding the legality of Trump’s reciprocal tariffs. A lot could still happen between now and Thursday when the two leaders are scheduled to formalize the agreement, and we should surely be prepared for the unexpected. Even so, there’s a sense of optimism present that we haven’t seen for some time that will hopefully yield the fruit of productive specifics in the days ahead.

China agreed to suspend its restrictions on rare earth minerals and magnets for one year – something that many western countries are excited to hear. I seriously doubt that China will allow exports of rare earth minerals and magnets for the production of high-tech military defense weapons, but I also do not expect that to be publicly discussed. That will likely continue to be a sticking point, allowing China to pick winners and losers in the world in who has the ingredients needed to produce high-tech defense weapons at a time when President Trump is trying to rapidly ramp up mining and processing here in the States. China agreed to restrict the key ingredients that go into fentanyl shipments into the United States, which may allow additional tariff relief. It also agreed to purchase a substantial amount of soybeans over the next several years, according to U.S. sources, but nothing has been specified yet. In reality, it only needs about 10 mmt or 367 million bushels to close the gap ahead of the arrival of cheaper new-crop Brazilian supplies in February. We see evidence that Chinese buyers may have already purchased more than 50 million bushels at the end of last week. Sales of 10 mmt in the weeks ahead would likely help us hit USDA’s export target for this year, but I anticipate that additional purchases would likely be for the next marketing year. Anything above that 10 mmt in this marketing year would be a bonus, further tightening supplies.

President Trump also met with a number of other world leaders from Southeast Asia and elsewhere over the weekend, shoring up support from countries who China has been trying to get to side with it. That means stronger ties with other buyers of Ag commodities. He also had a productive conversation with President Lula of Brazil, which Lula said virtually “guarantees” a trade agreement with Brazil to remove the 50% tariffs that we currently have on their products. This would open the door for a flood of coffee and beef from Brazil if it happens. On the other hand, President Trump threatened another 10% tariff on Canada after one of its provinces aired TV adds featuring President Reagan speaking against trade restrictions, while also suspending talks with Canada.

The bottom line is that President Trump went a long way toward removing uncertainty from the economy over the weekend, assuming that all of these conversations turn into hard fast agreements. M2 money supply is at or near record highs, indicating that there is plenty of juice in the economy if we ease uncertainty concerns of businesses and consumers. Thursday’s meeting between Trump and Xi will be critical for continuing to move forward down that path, along with next month’s Supreme Court decision. We don’t have enough information yet to be bullish demand for U.S. commodities, but we do have enough to suggest that demand should stabilize going forward, with significant upside potential in that demand if this all plays out.

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Matt ZellerTue, 04 Aug 2026, 12:43

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Matt ZellerMon, 03 Aug 2026, 12:45

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July 31 – Stocks are clinging to modest gains at midday, with largely better than expected U.S. economic data today providing some optimism to end the week. The VIX briefly spiked to 18.7 earlier in the session but has since settled back to 17.15 at midday. The dollar has given back some of its gains on the day, now only modestly in the green, up roughly 0.1% to trade near 100.06 at the time of writing. Treasury action has been mixed thus far today, but yields remain notably elevated, with 30-year yields trading just below their 19-year high at 5.267%, 10-year yields just off their one-and-a-half-year high at 4.74%, and 2-year yields right at 4.30%. Crude oil remains quietly higher, with nearby WTI up 0.9% on the day near $84.70 and nearby Brent up 0.7% to trade near $87.40. The grains and oilseeds are widely lower at midday, with the wheat complex leading the way down, while the livestock sector is largely in the green.

Mike CastleFri, 31 Jul 2026, 16:33

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