Perspective: Morning Commentary for November 25

Perspective: Morning Commentary

Arlan Suderman

Chief Commodities Economist

November 25 – Stock futures pushed notably higher, while the dollar followed Treasury yields lower, following word that President-Elect Donald Trump selected Scott Bessent to be his next Treasury Secretary. The VIX dropped below 15 this morning, reflecting the easing concerns on Wall Street following the selection of one of their own, while the dollar index dropped sharply from last week’s two-year highs to trade near 106.7. Yields on 10-year Treasuries are trading near 4.30%, while yields on 2-year Treasuries are also trading near 4.30%. Crude oi prices pulled back from Friday’s two-week highs, while the grain and oilseed markets were mixed to lower.

Wall Street likes Trump’s selection of Scott Bessent as Treasury Secretary. He’s one of their own, and therefore Wall Street believes that Bessent will support what’s good for business in America, with reasonable tax cuts to spur growth. Bessent supports the use of tariffs, but primarily as a negotiating tool, while also being a strong advocate of the dollar’s dominant reserve currency status. His stated goals are to see the 2017 tax cuts extended. Those cuts are scheduled to expire at the end of next year. He also stated that he will work toward eliminating taxes on tips, social security benefits and overtime pay, keeping Trump’s campaign promise to do so. Bessent has also spoken out for fiscal control, which is something that should catch the attention of credit rating agencies. The 2022 agreement to suspend the debt ceiling expires on January 1^st. Congress is not expected to act on the debt ceiling prior to the end of its session, leaving the work to the new Administration and new Congress. As such, it will be the Treasury Department’s role to manage U.S. finances to limit additional growth in debt beyond December 31^st until Congress addresses the issue. It will be able to do so for a short period of time through accounting gimmicks, but the issue will eventually need to be dealt with by Congress. It will be Bessent’s job to oversee this accounting task until it does so, at least once he’s confirmed in his role.

China’s chief trade representative joined with other senior officials from multiple central government departments, to issue a document intended to “promote the stable growth of foreign trade.” Observers viewed the move as an indication that Beijing hasn’t given up hope in developing a comprehensive “package deal” with the incoming Trump Administration that could avoid escalation of a trade war between the two world powers. The odds of a such a deal are still seen as slim, but market observers inside of China recall that President Xi Jinping and Trump managed to reach a deal in Trump 1.0 in 2020. If successful in doing so again, observers inside of China believe such a deal could include the purchase of considerable quantities of U.S. agricultural commodities. Some have speculated that recent large purchases of U.S. corn by “unknown destinations” might be pre-buying by China for such a possible deal at a time when prices are near multi-year lows, but there’s still little hard evidence that such is the case.

Crude oil prices dipped overnight on reports that Israel and Hezbollah may be near an agreement for a two-month ceasefire. It’s being reported that a deal could be announced within days, although previous hopes for a ceasefire have been quickly dashed as the negotiations fell apart. In fact, several key issues remain unresolved. The risk for the commodity markets – especially the energy markets – continues to be if the war in the Middle East were to spread into a regional conflict involving Iran. We came very close to that earlier this year, but those concerns seemed to have eased for now after Israel successfully took out some key military targets in Iran. We’re also seeing Iran rethink its strategy after the election of Donald Trump earlier this month, which is expected to see enforcement of the sanctions against Iranian oil once again, squeezing off financing for the war against Israel. This provided more incentive for Iranian proxy groups to reach peace agreements.

Exporters sold 17.8 million bushels of U.S. corn to Mexico over the weekend, of which 3.5 million bushels is for delivery in the 2025-26 marketing year. We’ve seen a flurry of demand for U.S. corn and soybeans in recent days as buyers take advantage of current price levels. Demand for soybeans has picked up each time that January soybeans dip below the $10 mark, which it did again last week. However, that buying seems to be having increasing difficulty in sustaining price strength, with lower highs noted with each rally. Note that the November ’25 contract set new contract lows last week. The December corn chart looks the healthiest of the major Ag commodities currently as it continues to trend higher, although capped at the $4.35 level on the charts. However, the December contract will be moving into its delivery period at the end of the week, with the March contract soon to take the lead. It too has resistance near the $4.35 level, but keep in mind that the deferred contracts tend to ratchet down when the lead contract goes off the board, and the December ’25 contract currently reflects weaker dynamics. Wheat prices reflect new Southern Hemisphere supplies hitting the market. Underlying support comes from ongoing geopolitical risks in the Black Sea, but new crop supplies from Argentina and Australia should help to keep the market supplied for now.

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