Perspective: Morning Commentary for July 30

By: Arlan Suderman, Chief Commodities Economist

Wed, 30 Jul 2025, 13:32

Perspective: Morning Commentary

Arlan Suderman

Chief Commodities Economist

July 30 – It’s Fed Day on Wall Street, but there’s also plenty of talk about this morning’s second quarter GDP numbers as well. The VIX is trading below 16 this morning, as stock futures post modest gains near record territory, while the dollar index trades at a fresh five-week high near 99.4. Yields on 10-year Treasuries are trading near 4.37%, while yields on 2-year Treasuries are trading near 3.91%. Crude oil prices are firmer as they approach the $70 level, while the grain and oilseed markets traded mixed to weaker overnight.

Gross domestic product grew at an annual rate of 3.0% in the second quarter of this year, beating the average analyst estimate of 2.5%, and reversing the -0.5% reading that was posted for the first quarter of the year. Personal consumption expenditures rose at an annual rate of 1.4% in the second quarter, matching analyst expectations, and up from 0.5% in the first quarter. The two quarters need to be looked at in combination, due to inventory adjustments revealed in the surveys that were largely a reaction to President Trump’s tariff policy. Retailers hoarded inventories in the first quarter ahead of the reciprocal tariff announcement, yielding a negative GDP number for that quarter, while they drew down those inventories in the second quarter, resulting in a stronger GDP number. The question now is, where do we go from here?

The Federal Open Market Committee will try to answer that question as they wrap up two days of meeting today. Pardon me for being skeptical, but I don’t think that they know where we go from here. As such, I don’t expect to see any policy change from the Fed regarding its benchmark interest rate today, and the market agrees that the Fed doesn’t know – calling for just 2% odds that we’ll see a rate cut today. The focus will largely be on Fed Chair Jerome Powell’s comments in the press conference that follows the statement release, in addition to any potential changes to the wording of that statement. The Fed will likely acknowledge that the economy remains rather resilient, inflation remains elevated but at relatively low levels, and that employment remains solid, with some areas of softness. Powell will no doubt get more questions about tensions between he and President Trump, who continues to campaign for lower interest rates to ease the burden on servicing our national debt while stimulating the economy. He will again speak of the independence of the Fed in setting monetary policy. The market is trading better than 60% odds that we see a rate cut at the Fed’s September meeting, with two rate cuts expected by the end of the year. The Fed will have the luxury of viewing two more government jobs reports between now and its September meeting, along with two more inflation reports.

This morning’s ADP report indicated that the private sector created 104K new jobs in July, exceeding analyst expectations of 75K job creations. The June data was revised upward to 23K job losses, which is an improvement from the 33K job losses originally reported. The correlation between ADP’s private sector job report and the government’s monthly job report is not strong, but it does help to set expectations. Nonetheless, those expectations are relatively low at 110K job creations to be announced on Friday, amid expectations that the job participation rate will tick slightly higher, and that the unemployment rate will tick upward to 4.2%, with average hourly earnings ticking higher as well.

We’re two days away from President Trump’s deadline for nations to reach trading agreements with us to avoid an escalation of reciprocal tariffs. The list of countries that have reached trade deals continues to grow, including some big names such as the European Union, Japan, Britian, etc. That list is significant enough that it has bolstered confidence on Wall Street, fueling the rise to record highs for the equities. But there are also significant countries that do not yet have trade deals with the United States, including China, India, Mexico, Canada, and others. China has until August 12^th to reach a deal. China reports that it has an agreement with the United States to extend its deadline another 90 days, although that has not yet been approved by President Trump. The president also tried to push India into an agreement by announcing that he will put a 25% tariff on that country on August 1, indicating that there will also be an additional “penalty” announced, likely tied to India’s support for Russia.

It’s the end of July, and we have no official new-crop soybean sales to China on the books. That could quickly change, pending the ongoing negotiations, but we have to assume a risk that it will not change. China has booked nearly 6 million metric tons (220 million bushels) of Brazilian supplies for delivery in September through November thus far – a time period when the United States used to dominate market share to China. However, the primary market focus at this point is on high U.S. corn and soybean crop condition ratings, that are pushing trade yield models well beyond trend levels, raising the risks of burgeoning supplies over the coming year.

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