Perspective: Morning Commentary for August 25

Perspective: Morning Commentary
Arlan Suderman
Chief Commodities Economist

August 25 – Stock futures had a positive tone to them overnight ahead of this morning’s highly-anticipated speech by Federal Reserve Chairman Jerome Powell at the Fed’s Jackson Hole, Wyoming symposium. Of course, the overnight bounce comes following a sharp reversal lower on Thursday. The VIX is trading below 17, while the dollar index is trading near 104.0, after posting a fresh 11-week high above 104.3 earlier this morning. Yields on 10-year Treasuries are trading near 4.25% ahead of Powell’s comments, while yields on 2-year Treasuries are trading near 5.04%. Crude oil prices are trading more than 1% higher in early trade, while the grain and oilseed sector traded mostly higher overnight.

Fed fund futures are trading roughly 20% odds of another rate hike at the September meeting this morning as traders try to anticipate Powell’s comments at Jackson Hole at 10 a.m. EDT this morning. While odds of a rate hike at the November meeting are now trading up to nearly 50-50. These are much higher odds than we saw a week ago, with traders also starting to discount expectations for big cuts in rates next year. In other words, the market is starting to take the Federal Reserve at its word for what it’s been saying for a long time now. Ironically, the history of the Fed indicates that it tends to cut rates when the market isn’t expecting it to do so, and it tends to be rather rapid when it makes those cuts. I’ve been anticipating the possibility of a September 20 rate hike, although that’s going to hinge on the next jobs report and another round of inflation data between now and then. I’m simply going off of what the Fed has told us are its driving factors for making decisions, and those currently still point to higher rates for longer. That may change at some point, but the data points that the Fed follows thus far do not show thus.

BRICS is a coalition of world economies that formed in 2010 when South Africa joined Brazil, Russia, India, and China to form the block of nations focused on economic cooperation. The BRICS coalition grew in significance over the past year as China and Russia began to see it as a tool to use in combatting the West. BRICS nations set up their own bank facility that would facilitate trade between member countries without needing to utilize the U.S. dollar, which continues to be a dominant world currency. China and Russia then sought to expand membership to bring other nations in who would participate in China’s Belt and Road Initiatives, which create more dependencies on China, while helping to fuel China’s ailing economy. The addition of these other nations also helps propagate economic strategies that separate them from dependency on the West.

BRICS added six more nations to their coalition this week, as I outlined yesterday, including Saudi Arabia, Iran and UAE. Russia and Iran have already accepted the Chinese yuan as the base currency for crude oil trade with China, while the same is true for oil and gas exporters Saudi Arabia and UAE. BRICS members now account for about 40% of the world’s global crude output. BRICS has been effective at eroding use of the dollar, but it still has many obstacles to overcome before toppling the dollar. But BRICS targeting of crude oil producers as members should provide additional incentive for the United States to again focus on energy independence. We’re currently seeing the influence of Russia via these coalition ties in elevating world crude oil prices to fund its war efforts as other nations via OPEC+ cut output to drive prices higher, putting added upward pressure on western inflation trends with negative implications for their economies. China and Russia may have a greater negative influence on the West by its use of energy as an economic weapon than its ability to effectively threaten the dollar, especially at a time when fossil fuel use is being threatened here in the States as well. Its inclusion of these influential OPEC+ nations expands its influence beyond current BRICS nations.

The Pro Farmer Midwest Crop Tour is complete, except for the final results. Those results will be released later today, likely after the markets close, although they leaked out early last year. There are plenty of reasons to criticize this tour, but it needs to be put in its context. USDA quit walking fields to develop its August crop report production estimates a few years back. It now does so the first time in September. As such, the Pro Farmer tour provides our best look at the crop ahead of that September 12th report. The September USDA estimate will be much more thorough doing a better job of sampling the entire Corn Belt, but the tour provides the best picture of the corn and soybean crops ahead of September 12. Forget about the numbers but focus on the reports from the field. They told us that there are problem areas created by times of crop stress during critical development phases, including the hot dry period we’re currently experiencing in the Midwest. Those have, are and will take their toll on the corn and soybean crops. But this is not a 2012 disaster. It is enough of a concern for soybeans to threaten the balance sheet IF China comes in with somewhat “normal” demand this fall, although that is still in doubt. However, corn demand is likely so much weaker than currently forecast by USDA that we could take a significant hit to yields without requiring price rationing. Look for USDA to reduce demand as it reduces yields to keep corn stocks well above year ago levels for now. Soybean traders though must respect the possibility that export demand might hold up IF China wants to focus on building its reserves rather than drawing on them.


The StoneX Group Inc. group of companies provides financial services worldwide through its subsidiaries, including physical commodities, securities, exchange-traded and over-the-counter derivatives, risk management, global payments and foreign exchange products in accordance with applicable law in the jurisdictions where services are provided. References to over-the-counter (“OTC”) products or swaps are made on behalf of StoneX Markets LLC (“SXM”), a member of the National Futures Association (“NFA”) and provisionally registered with the U.S. Commodity Futures Trading Commission (“CFTC”) as a swap dealer. SXM’s products are designed only for individuals or firms who qualify under CFTC rules as an ‘Eligible Contract Participant’ (“ECP”) and who have been accepted as customers of SXM. StoneX Financial Inc. (“SFI”) is a member of FINRA/NFA/SIPC and registered with the MSRB. SFI is registered with the U.S. Securities and Exchange Commission (“SEC”) as a Broker-Dealer and with the CFTC as a Futures Commission Merchant and Commodity Trading Adviser. References to securities trading are made on behalf of the BD Division of SFI and are intended only for an audience of institutional clients as defined by FINRA Rule 4512(c). References to exchange-traded futures and options are made on behalf of the FCM Division of SFI . StoneX is a trading name of StoneX Financial Ltd (“SFL”). SFL is registered in England and Wales, Company No. 5616586. SFL is authorized and regulated by the Financial Conduct Authority [FRN 446717] to provide to professional and eligible customers including: arrangement, execution and, where required, clearing derivative transactions in exchange traded futures and options. SFL is also authorised to engage in the arrangement and execution of transactions in certain OTC products, certain securities trading, precious metals trading and payment services to eligible customers. SFL is authorised & regulated by the Financial Conduct Authority under the Payment Services Regulations 2017 for the provision of payment services. SFL is a category 1 ring-dealing member of the London Metal Exchange. In addition SFL also engages in other physically delivered commodities business and other general business activities which are unregulated and not required to be authorised by the Financial Conduct Authority. StoneX Group Inc. acts as agent for SFL in New York with respect to its payments services business. StoneX APAC Pte. Ltd. acts as agent for SFL in Singapore with respect to its payments services business. ‘StoneX’ is the trade name used by StoneX Group Inc. and all its associated entities and subsidiaries.


Trading swaps and over-the-counter derivatives, exchange-traded derivatives and options and securities involves substantial risk and is not suitable for all investors. Past performance of any futures or option is not indicative of future success. Indicators are not a trading system and are not published as a specific trade recommendation. The information herein is not a recommendation to trade nor investment research or an offer to buy or sell any derivative or security. It does not take into account your particular investment objectives, financial situation or needs and does not create a binding obligation on any of the StoneX group of companies to enter into any transaction with you. You are advised to perform an independent investigation of any transaction to determine whether any transaction is suitable for you. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of StoneX Group Inc.


© 2023 StoneX Group Inc. All Rights Reserved.

Discover more insights

Our subscribers have access to comprehensive market analysis from StoneX spanning commodities, equities, currencies and more.
See why StoneX is a partner of choice

Let’s get connected

To learn more about how our customized financial solutions can help you stay one step ahead in the global markets, contact our team today.

Select your Location

Contact us


By submitting this form, you are sending StoneX Group Inc. and its subsidiaries your personal information to be used for marketing purposes. View our  Privacy policy  to learn more.

If you're an existing customer, please direct any inquiries to your StoneX sales team.