Perspective: Mid-Day Commentary for January 31

By: Arlan Suderman, Chief Commodities Economist

Fri, 31 Jan 2025, 18:20

Perspective: Mid-Day Commentary

Arlan Suderman

Chief Commodities Economist

January 31 - Money flow continues to ebb and flow between the tech sector and other stocks. The tech sector is the strength of the equity market at midday, even as the market holds its collective breathe as we head into a weekend likely to be filled with headlines about tariffs - either on or off or some combination. The VIX continues to trade near 15, reflecting relative calm for Wall Street, which is much different than how the day started for sectors of the commodities. The dollar index came off its session high to trade near 107.9. Yields on 10-year Treasuries are trading near 4.52%, while yields on 2-year Treasuries are trading near 4.21%. Crude oil prices are modestly lower, while the grain and oilseeds are mixed to lower.

Tariff fears mixed with month-end trading to pressure prices overnight, with tariff fears being the greater factor. Those fears eased somewhat in today's trading session. First, the market is starting to realize that tariffs won't immediately be applied tomorrow. It normally takes two to three weeks for the process to get set up for tariff collection. As such, Reuters is now reporting that the tariffs would actually go into effect on March 1, giving time for Canada and Mexico to apply for exemptions, even as negotiations continue, and those negotiations are happening. Second, we won't likely see universal tariffs applied. That would have a devastating impact on the economies of Canada, Mexico and the United States if all three did universal 25% tariffs. President Trump may choose to scale up the tariffs. He might decide to utilize different tariff rates on different products. Trump has stated that the tariff may not be universal. For example, he may not include Canadian crude oil because that would be inflationary. Each country will likely do the same with retaliatory tariffs. This is an evolving story that we will again likely trade on Sunday night into Monday.

Meanwhile, the debate over the 2025 acreage mix continues to heat up. This winter's rally in the grain and oilseed markets was led by fund buying in corn based on tightening supplies among the major exporters. The rally came ahead of Brazil's winter corn planting and ahead of planting decisions here in the United States as well. Our StoneX Brazil team will report the results of its February customer survey on Monday, including acreage estimates for safrinha corn. USDA will survey U.S. farmers about their planting intentions on or around March 1st. The below graphic looks at the new-crop soybean / corn price ratio at the end of February versus corn acreage changes that show up in the March 1 Planting Intentions Survey for the coming growing season. First, note that the correlation is -0.56. We consider a correlation of 0.70 or greater to be significant. That says that other factors go into planting intentions than just the soybean / corn price ratio, like weather and crop rotations. The below suggests that we add a couple of million corn acres this coming year, but seed sales data suggests that we may add quite a bit more than that.

image-20250131122118-1

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