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Perspective: Morning Commentary for September 21

By: Mike Castle, Market Intelligence - Fertilizer Analyst

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September 21 – Diplomacy is in focus to start the week, with world leaders gathering for the U.N. General Assembly kicking off in New York tomorrow and Chinese President Xi Jinping traveling to the U.S. to meet with President Trump in a highly anticipated summit on Thursday. Given the wide array of geopolitical conflicts impacting the broader markets, this round of diplomacy may carry more importance than usual, with traders likely to cling on any signal toward an easing of tensions and resumption of global commodity flow, particularly as it relates to the energy sector. President Trump is expected to meet with Gulf Cooperation Council leaders this week to discuss the ongoing conflict in the region, with a likely increase in urgency amid the ongoing escalations between Saudi Arabia and the Iran-backed Houthis of neighboring Yemen. Iranian President Masoud Pezeshkian is also traveling to the U.S. this week, expected to address the Assembly on Wednesday. Markets will be watching the language of this address, and President Trump’s, for signals of potential de-escalation between the two sides, or for signals of a widening of the conflict. The bigger question in my mind is whether we see direct talks between Trump and Pezeshkian—Trump over the weekend said he was open to such a meeting, but nothing has been confirmed as of this morning. Additionally, Trump is expected to meet with Ukrainian President Zelenskyy on Wednesday, carrying significant implications for both the energy and ag sectors. Given the wide range of implications from this week’s diplomacy and existing managed money positions coming in, don’t be surprised by a week of volatile, headline-driven trade.

Markets are clearly pricing in optimism for this week’s diplomacy, with stock futures pointing to a strong open and oil prices continuing their decline despite significant escalations on the ground over the weekend. Wall Street is showing little fear to kick off the week as the VIX holds near its lowest level since early September, near 14.8 at the time of writing. The dollar is holding near unchanged this morning, hovering around 100.23 after last week’s spike. Treasuries are off to a quiet start as well, with 2-year yields trading at 4.735%, 10-year yields at 4.967%, and 30-year yields at 5.30% to start the day. Crude oil is adding to late-week losses, with nearby WTI down 2.6% on the day to trade near $93, a two-week low, and nearby Brent down 2.4% on the day to trade near $101.30. Meanwhile, the ags are looking at a mostly positive open to start the week, with a rain-delayed U.S. harvest and signals of progress in U.S./China relations in focus.

The Iran-backed Houthis attacked the Saudi capital of Riyadh for the first time in nearly five years over the weekend, with Saudi officials stating most of the barrage was intercepted by air defenses, but a major fire at an Aramco storage facility adjacent to the King Khalid International Airport raising concerns of more significant escalations to come. The Houthis also continued their targeting of cities and energy infrastructure in western Saudi Arabia, most notably the now-critical Red Sea port of Yanbu. On the other side, Saudi Arabia substantially increased their air campaign, while Yemeni government forces stabilized several inland fronts, but there was no major rollback of Houthi control around the Bab al-Mandab Strait over the weekend. Perhaps the more notable development the market is watching is what has not happened—direct intervention from the U.S. Houthi officials yesterday told the Associated Press: “we confirmed that we are not targeting the United States, or any other nation, in the strait, with the sole exception of the Saudi enemy.” This follows reports of the Saudis asking the U.S. to get involved amid the rapid Houthi advance on the ground in recent weeks, but the U.S. has thus far refused to do so, instead opting to provide additional equipment and non-combat advisors. Similarly, Turkey and Pakistan have thus far been cautious about getting involved despite the nations’ recent defense pact with Saudi Arabia. This is something worth keeping an eye on during this week’s diplomatic push.

U.S. Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng met yesterday, kicking off a big week for relations between the world’s two largest economies with wide-ranging implications for commodity markets and laying the groundwork for Chinese President Xi Jinping’s trip to D.C. later this week. To that point, trade remained the core issue discussed between the two sides, though no major updates or announcements were made. This is no surprise, however, as we would expect any meaningful trade announcements to be saved for the main event with Trump and Xi together. Both governments described yesterday’s talks as “candid” and “constructive,” providing enough optimism to keep support under the grains and oilseeds to start the week.

AI is coming into focus at these talks as well, also carrying major market implications given the lofty investment being thrown at the tech sector in both countries. The dialogue to kick this off appeared constructive as well, with the two sides emphasizing the need for cooperating on managing the risks of the technology. Perhaps the best quote from the weekend talks was Bessent’s statement: “moving from opaque to more transparency between the number one and number two AI powers in the world is very important.” This highlights the ongoing competition between the two nations but expresses the common goal of maintaining guardrails and crisis communication to avoid more security risks down the road. While the market will be looking for concrete signals on renewed Chinese purchases of U.S. agricultural commodities, most notably on the non-soy side where we’ve yet to see progress, that optimism will be balanced against persistent technology-related tensions, including not just AI development but also China’s control over critical rare-earth mineral supply chains. The weekend talks with lower-level officials were broadly positive, and the market will continue to monitor the developments closely.

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Perspective: Morning Commentary for September 21

September 21 – Diplomacy is in focus to start the week, with world leaders gathering for the U.N. General Assembly kicking off in New York tomorrow and Chinese President Xi Jinping traveling to the U.S. to meet with President Trump in a highly anticipated summit on Thursday. Given the wide array of geopolitical conflicts impacting the broader markets, this round of diplomacy may carry more importance than usual, with traders likely to cling on any signal toward an easing of tensions and resumption of global commodity flow, particularly as it relates to the energy sector. President Trump is expected to meet with Gulf Cooperation Council leaders this week to discuss the ongoing conflict in the region, with a likely increase in urgency amid the ongoing escalations between Saudi Arabia and the Iran-backed Houthis of neighboring Yemen. Iranian President Masoud Pezeshkian is also traveling to the U.S. this week, expected to address the Assembly on Wednesday. Markets will be watching the language of this address, and President Trump’s, for signals of potential de-escalation between the two sides, or for signals of a widening of the conflict. The bigger question in my mind is whether we see direct talks between Trump and Pezeshkian—Trump over the weekend said he was open to such a meeting, but nothing has been confirmed as of this morning. Additionally, Trump is expected to meet with Ukrainian President Zelenskyy on Wednesday, carrying significant implications for both the energy and ag sectors. Given the wide range of implications from this week’s diplomacy and existing managed money positions coming in, don’t be surprised by a week of volatile, headline-driven trade.

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