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Perspective: Morning Commentary for July 23

By: Arlan Suderman, Chief Commodities Economist

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July 23 – Renewed AI concerns and rising oil prices combined with higher interest rates to weigh on stock futures overnight as many of the food and energy-based commodities saw sustained buying interest. The VIX firmed to trade near 19 this morning, while the dollar index followed Treasury yields higher, trading near 101.4. Yields on 10-year Treasuries traded near 4.70%, representing a fresh 18-month high, while yields on 2-year Treasuries traded near 4.35%, reflecting fresh 17-month highs. WTI crude oil traded near $91 per barrel, while Brent traded near $100 per barrel. The grain and oilseed markets were mostly higher, with the exception of minor losses in the hard wheat markets.

Houthi rebels targeted two Saudi oil tankers trying to leave the Red Sea, with Saudi Arabia’s news agency reporting that one of the two was on fire. Yet, 27 vessels managed to safely cross the Bab el-Mandeb strait on Wednesday, including five oil tankers and a liquified petroleum gas carrier. That’s down from 38 vessels that passed the previous day. Yet, two Chinese supertankers – each carrying 2 million barrels of oil – exited the Red Sea via the Bab el-Mandeb Strait today, testing the resolve of Houthi rebels who declared a blockade of the Saudi ports. The Chinese vessels pushed through following the Houthi attacks earlier in the day. The Singapore-flagged super tanker Xin Long Yang made a U-turn on Tuesday to avoid passing through the Bab el-Mandeb Strait, but it turned back south again toward the Strait on Wednesday, carrying Saudi oil to China. The Chinese-flagged supper tanker Cosnew Lake was following it. Both ships indicated via their transponders that they contained Chinese crew members. President Trump posted on Truth Social this morning a warning to Iran that it will suffer “major military punishment” each time that the Iran-backed Houthis attack a ship.

Two supertankers exited the Persian Gulf via the Strait of Hormuz today, carrying 2 million barrels of oil each. One of those carried Iraqi oil to China and the other UAE oil. Three commodity vessels passed through the Strait of Hormuz on Wednesday, down from four the previous day, and down from 18 the previous Wednesday. Reuters reports that there were 253 laden tankers in the Perian Gulf as of Monday, including 102 oil tankers, 64 LNG carriers and 66 LPG carriers. President Trump threatened to take out an Iranian bridge or power plant each time that Iran attacks a ship, including possibly in Tehran. The bottom line is that the flow of energy and fertilizer out of the Strait of Hormuz is at a mere trickle of what it needs to be to sustain global demand currently. The energy risks are well documented, and a reason for the recent push higher by crude oil prices. However, the table is being set for a significant shortage of fertilizer for global 2027 crops, unless something else (like weather) sufficiently reduces demand. There’s still time for that to change, but we’re rapidly approaching time when 2027 supplies are shipped.

Russia will subsidize roughly 90% of the rail costs associated with rerouting wheat and other products to either its Black Sea port at Novorossiysk or alternative Baltic ports. The Sea of Azov is off limits currently for exports due to Ukrainian strikes on ships, leaving Russia scurrying to find other routes to get its wheat and other products exported. It’s primary Black Sea port at Novorossiysk is already facing nearly daily attacks from Ukraine, leading it to shut down operations from midnight to 5 a.m. each day, which reduces its capacity. Meanwhile, Ukraine is also seeking to facilitate alternative routes to move wheat and corn to export corridors after Russian attacks essentially shut down its deep sea ports. That includes rail movement into Europe, as well as utilization of other ports along the Danube River. However, low water levels on the Danube complicate those efforts. The above shows how grain always finds a way to move, albeit at a higher cost and via routes of reduced efficiency. We will not likely see a total shutdown of Russian and Ukrainian exports of wheat, corn, sunflower oil and other products, but we can expect to see a notable slowdown in movement, with some customers looking for alternative sources.

Taiwan remains a flashpoint in the Indo-Pacific, even though most of the news headlines are focused on the Middle East and on the Black Sea conflicts. Taiwan’s leader, William Lai, stated that Taiwan was “not subordinate” to China, triggering two days of live-fire military drills around the island by the Chinese military. The exercises were conducted near Dongshan Island in Fujian, including restricted maritime zones that were followed by Chinese amphibious and coastal live-fire training. China also completed fisheries and seabed surveys east of Taiwan, reflecting its administrative and strategic presence around Taiwan. Both Japan and the United States have previously promised to help Taiwan defend itself from Mainland China, while President Xi of China has promised to “reunite” Taiwan to the mainland at some point. The military exercises around Taiwan are meant to intimidate the island while also allowing China to test its capabilities and to also test Taiwanese responses. Yet, China continues to purchase U.S. soybeans as a means to get concessions from President Trump on other major trade issues.    

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Perspective: Morning Commentary for July 23

July 23 – Renewed AI concerns and rising oil prices combined with higher interest rates to weigh on stock futures overnight as many of the food and energy-based commodities saw sustained buying interest. The VIX firmed to trade near 19 this morning, while the dollar index followed Treasury yields higher, trading near 101.4. Yields on 10-year Treasuries traded near 4.70%, representing a fresh 18-month high, while yields on 2-year Treasuries traded near 4.35%, reflecting fresh 17-month highs. WTI crude oil traded near $91 per barrel, while Brent traded near $100 per barrel. The grain and oilseed markets were mostly higher, with the exception of minor losses in the hard wheat markets.

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Arlan Suderman
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  • Renewable Fuels
  • Cocoa
  • Coffee
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  • Forest Products

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