Perspective: Morning Commentary October 10

By: Arlan Suderman, Chief Commodities Economist

Fri, 10 Oct 2025, 13:38

Today's Perspective Video: What USDA Won't Say

October 10 – It’s day #10 of the partial government shutdown, and stock futures bounced modestly overnight following Thursday’s losses, as they continue to trade near this week’s record high levels. Stock futures stabilized overnight, despite an escalation of the trade war with China over the past 24 hours. The VIX continues to trade between 16 and 17, suggesting that Wall Street is not significantly phased by the escalation, although the impact was certainly seen in the commodity markets. The dollar index traded near 99.3 this morning, after setting a nearly 10-week high on Thursday. Yields on 10-year Treasuries are trading near 4.09% this morning, while yields on 2-year Treasuries are trading near 3.57%. Crude oil prices sank to fresh five-month lows, while the grain and oilseed markets were mostly lower as well on the deteriorating relationship with China.

Relations with China are cooling, rather than warming ahead of the highly anticipated meeting of President Trump and President Xi in South Korea at the APEC conference in three weeks. The first signs of the escalation were seen yesterday when China added more rare earth minerals and magnets to its list for restrictions on exports. It then followed that with port fees starting on October 14 targeting vessels owned or operated by U.S. firms or individuals that call on Chinese ports. Multi-national shipping companies possibly impacted would include Koch, Cargill, Diana, Star Bulk, Genco, and Bunge, among others. China’s move is a response to port fees on Chinese owned or operated vessels calling on U.S. ports starting on the same day, although bulk carriers are largely exempt when arriving empty to load U.S. grain and other commodities. Roughly a quarter of the ships on the water today were built by China, although it has totally dominated the shipbuilding industry in recent years, while less than 1% of the ships on the water today were built by U.S. firms.

President Trump countered with threats to cut off American purchases of consumer goods from China, while also threatening to ban Chinese airlines from flying over Russian airspace on U.S. flights. Granted, the two world leaders are playing a big game of chess with significant implications for the economies of both countries, and much of the world, but also with significant implications for the commodities. Trump boldly proclaimed in recent Truth Social posts that he would “Make soybeans, and other row crops, great again” when he meets with Xi later this month. But the recent escalation, especially regarding restrictions on rare earth minerals and magnets and Trump’s threats regarding purchases of consumer goods, pushes soybeans down the list of items to be discussed when the two meet. It doesn’t mean that the two can’t reach an agreement, but it certainly reflects why I’ve remained skeptical of a blockbuster agreement.

The trade war is having a detrimental impact on China’s economy. Consumer confidence remains near record lows, while property values continue to sink. Certain sectors of China’s economy have thrived, but only with heavy subsidies from the government that continue to balloon its debt burden. The recent Golden Week holiday in China saw significant growth in travel within the country, but the initial data shows that Chinese consumers focused on experiences and services rather than purchases of goods. Goods consumption rose 3.9% year-on-year during the holiday week, while service consumption rose 7.6%. Domestic tourism spending hit $113.9 billion during the eight-day holiday, matching the daily average of last year’s seven-day holiday break. Sales at key retail and catering businesses rose 2.7% on the year, while experience-related services rose 8.5%. Leisure and sightseeing surged by 17.6%, while cultural and art services jumped 18.6%. So, Chinese consumers still have money to spend, but they’re spending it on experiences rather than committing to manufactured goods or longer-term commitments. China faces more of a deflation problem than an inflation problem as spending is often stimulated by price cuts and subsidies. It's manufacturing sector continues to contract, while its service sector is on the cusp of contraction, outside of holiday spending as outlined above. Youth unemployment is approaching 20%, leading to a sharp drop in marriages and in the birthrate, further aggravating its population decline. Money supply continues to grow in China only because of massive injections by the central government adding to its bloating debt problem. China isn’t on the cusp of collapse, but it is paying a price to play the long game to outlast Trump.

Soybean prices led the grain and oilseed complex lower overnight. The corn and soybean charts are looking weaker, while Kansas City wheat posted fresh new contract lows. This market had been propped up by hopes of a commodity trade deal with China, but a dose of reality set in overnight. That doesn’t mean that we can’t get a deal, but the market is dealing with the realities of how difficult that might be to achieve. The soybean balance sheet is the most vulnerable if no deal is reached, but that creates headwinds for corn as well. Some pre-weekend harvest pressure is also seen, as the market anticipates that some cash grain will hit the market over the weekend.

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Matt ZellerMon, 03 Aug 2026, 12:45

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