Kansas City Wheat Report
Kansas City Wheat Report
Mike O'Dea
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Perspective: Morning Commentary February 25
By: Arlan Suderman, Chief Commodities Economist
February 25 – Stock futures pushed higher overnight, following a patriotic State of the Union speech delivered to Congress last night. The VIX slipped lower to trade near 19 this morning, while the dollar index traded near 97.9. Yields on 10-year Treasuries firmed to trade near 4.06%, while yields on 2-year Treasuries traded near 3.48%. Crude oil prices were modestly higher again, while the grain and oilseed sector was again mixed, with soybeans again posting small gains, while corn and wheat prices slipped modestly lower.
The State of the Union speech became a parade of American heroes last night, as President Trump sought to recognize and to honor those who have endured great tragedy and/or achieved great things for their country. He honored the U.S. Olympic hockey team for the gold medal it won in sudden death overtime win over rival Canada, while also awarding medals of honor to those who had shown great bravery in suffering much. It was a “feel-good-about-America” speech that was surely meant to influence independent voters ahead of the midterm elections to cast their ballot his way. It was the longest State of the Union speech on record, largely due to all of the interruptions to honor the long list of guests. It was very partisan in nature, but also very cleverly written and delivered. The speech was constructed to create a sense of nationalism and pride, while painting his opponents as “crazy.” It was difficult not to feel good about the many people that he honored, and to get swept up in the “feel good” moment, which was the intent of the speech. From that standpoint it was very effectively delivered. The speech will likely give the republicans a bump in the polls as intended, but that support could vanish quickly if there’s a lack of follow up strength in the economy as perceived by the independent voter.
Stock futures briefly sank when President Trump addressed tensions with Iran. He promised that Iran would not be allowed to gain a nuclear weapon, while seemingly laying out his case to prepare America for a possible strike on Iran if deemed necessary. Yet, stock futures quickly rebounded as Trump reverted back to the remainder of his patriotic speech honoring American heroes. Nonetheless, the escalating Iran tensions continue to be a factor for the energy markets this morning, and they are certainly something be monitored by stock traders as well.
Noticeably absent from President Trump’s speech was much mention of China. In fact, he only mentioned China once in his record long speech, and that was a brief mention of Chinese and Russian military technology that was guarding Venezuelan President Maduro when U.S. troops extracted him to face charges in the United States. He similarly tried to avoid direct confrontation with China in his 2025 speech when he tried to sell America on the use of tariffs to re-establish America’s position in the world. A year ago he was preparing for a direct confrontation with China, whereas now he’s preparing for a direct engagement in Beijing, where he will meet with President Xi Jinping in person again. This will be a follow up meeting from the direct meeting that the two leaders had in South Korea on October 30, 2025. It’s yet to be seen whether this next meeting will be successful, but the fact that a date of March 31 has been set for Trump’s arrival in Beijing suggests that the two countries are relatively close to a deal that the two leaders can champion. Someone wisely counseled Trump in his first term that Chinese culture values a relationship of respect. That’s how you get things done in China. Trump’s team, and Trump himself, is trying to re-establish that relationship of respect in his second term in office, while still holding strong positions against China.
That matters to the commodity sector. For reasons that I’ve previously outlined, President Xi needs concessions from President Trump that would help to shore up his economy by way of easier access to the vast U.S. consumer market, as well as access to the high-value chips produced in the States. U.S. soybeans landed at the port in China cost roughly $1.30 to $1.40 per bushel more than Brazilian soybeans today. But Xi may be willing to pay that “small” price if it curry’s Trump’s favor to make concessions in other areas that would benefit Xi. President Xi understands that Trump also needs him as Trump seeks to secure his political base ahead of the 2026 midterm elections. That relationship of the two world powers needing each other may provide a window of opportunity to see U.S. Ag and energy commodities flow to China. It doesn’t mean that either of them have forsaken their long-term objectives, but rather that they are both willing to play the short game to help them survive politically for more time to capture those long term objectives. That could bode well for soybean export demand in particular, but possibly other commodities as well. We also anticipate seeing the U.S. Environmental Protection Agency send its final biofuel guidelines to the White House Office of Management and Budget any day now. That could also trigger some demand optimism, which is another reason why soybean and soybean oil prices have remained well supported, despite being well supplied currently. The industry will also be listening for any market-breaking news when USDA Secretary Rollins addresses farmers at this year’s Commodity Classic in San Antonio tomorrow.
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