Xi: ‘Danger’ to U.S. Ties If Taiwan Issue Is Mishandled
Soybean, corn traders, stakeholders didn’t get the bullish news they expected from Trump/Xi summit… at least for now | Retail sales
| LINKS |
Link: Video: Wiesemeyer’s Perspectives, May 9
Link: Audio: Wiesemeyer’s Perspectives, May 9
| Updates: Policy/News/Markets, May x, 2026 |
| UP FRONT |
TOP STORIES
— Trump/Xi summit opens with warm public tone, but China raises Taiwan: President Donald Trump and Chinese President Xi Jinping struck a conciliatory public tone in Beijing while major disputes over Taiwan, trade, Iran and technology remained unresolved. Talks also focused on extending the tariff truce, expanding Chinese purchases of U.S. agricultural and energy products, and exploring a possible new U.S./China “board of trade” framework.
— China soybean expectations tempered: Treasury Secretary Scott Bessent’s comments that China’s soybean commitments are “all taken care of” under the Busan agreement pressured soybean futures and reinforced expectations that no additional large-scale soybean deal may emerge from the Trump/Xi summit.
— China renews U.S. beef plant licenses, but did they? Conflicting reports emerged over whether China renewed export licenses for hundreds of U.S. beef plants, creating uncertainty in cattle and meat markets as traders assessed the potential reopening of a key export channel.
— House approves year-round E15 expansion: The House narrowly approved nationwide year-round E15 gasoline sales, delivering a major win for ethanol producers and corn growers while setting up a difficult fight in the Senate.
— Senate outlook for year-round E15 remains uncertain: Despite House passage, Senate procedural hurdles, refinery opposition, and EPW Committee politics continue clouding the path forward for permanent nationwide E15 legislation.
— Hormuz traffic resumes under Iranian oversight: Iran said more than 30 vessels transited the Strait of Hormuz overnight under coordination with the IRGC, signaling Tehran’s growing efforts to assert operational control over the critical global energy chokepoint.
— Summit drops South Dakota pipeline route: Summit Carbon Solutions removed South Dakota from its carbon pipeline route and shifted expansion plans into Nebraska after years of political opposition and landowner resistance.
FINANCIAL MARKETS
— Equities today: U.S. Dow opened around 360 points higher on strong corporate earnings and optimism surrounding the Trump/Xi summit, while markets also monitored Fed speeches, oil prices and developments near Hormuz.
— Retail sales hold up despite inflation pressure: U.S. retail sales rose modestly in April, driven largely by higher gasoline prices tied to the Iran war rather than stronger underlying consumer demand.
— Dollar surges as inflation data reinforces higher-for-longer Fed outlook: Rising energy-driven inflation pushed the dollar sharply higher as markets priced out Fed rate cuts and increased expectations for another rate hike later this year.
—China pushes yuan to new high against dollar: Stronger yuan signals Beijing’s effort to project financial stability during the Trump/Xi summit while rising U.S. inflation and trade tensions reshape global currency markets.
— Equities yesterday: The Nasdaq and S&P 500 both reached fresh record highs amid continued strength in technology shares.
— Long bonds hit 5%: The U.S. Treasury sold 30-year bonds above a 5% yield for the first time since 2007 as inflation fears and elevated energy prices pressured long-term borrowing costs.
— Warsh confirmed as Fed Chair in narrow, politicized Senate vote: Kevin Warsh won Senate confirmation as Federal Reserve chair in one of the narrowest votes in modern history, underscoring growing political tensions surrounding the Fed and inflation policy.
AG MARKETS
— Grain futures retreat overnight on China demand concerns, profit-taking: Soybeans led a broad overnight grain selloff as traders reacted to weaker expectations for additional Chinese soybean demand and improving weather forecasts.
— U.S. ag export sales to China limited ahead of Trump/Xi summit: USDA export sales data showed subdued Chinese buying activity across several U.S. agricultural commodities ahead of the summit meetings.
— USDA daily export sales: USDA reported private export sales of 252,000 metric tons of soybeans to unknown destinations spanning both the 2025/26 and 2026/27 marketing years.
— Global grain markets: International grain markets remained mixed as traders weighed Black Sea competition, weather risks, Chinese demand uncertainty and elevated vegetable oil prices.
— China wheat harvest enters critical stretch: China’s wheat crop moved into a pivotal harvest phase, with weather, diesel availability and possible government support measures expected to heavily influence final production outcomes.
— India halts sugar exports through September: India banned sugar exports through Sept. 30 to protect domestic supplies amid weaker production forecasts, El Niño concerns and rising input costs.
— Forced-labor cotton reappears in global apparel supply chains: A new Oritain report found prohibited Xinjiang cotton appearing more frequently in Western apparel supply chains as tariff-driven sourcing shifts complicated compliance efforts.
— Agriculture markets yesterday: Grain, livestock and cotton futures posted mixed closes Wednesday, with soybean meal and cattle markets showing notable strength.
FARM POLICY
— ARC outlook hinges on yield losses despite higher benchmarks: Analyst Paul Neiffer said higher ARC benchmark prices under OBBBA may still generate only limited payments unless county yields fall meaningfully below trend levels.
ENERGY MARKETS & POLICY
— Thursday: Oil market pauses with focus on Trump/Xi talks: Brent crude steadied near $105 per barrel as traders shifted focus toward diplomacy, Iran sanctions and tightening global oil supplies.
— Wednesday: Oil prices retreat as Fed concerns pressure energy markets: Crude oil futures declined as inflation fears and expectations for higher U.S. interest rates outweighed ongoing Middle East supply risks.
POLITICS & ELECTIONS
— Report: Redistricting battle could give GOP net House edge: Sabato’s Crystal Ball estimated Republicans could gain between six and 10 House seats from the latest round of congressional redistricting.
WEATHER
— NWS outlook: The National Weather Service forecast severe thunderstorm risks across parts of the Plains and Mississippi Valley along with mixed precipitation in the Pacific Northwest.
— Heavy rain pattern threatens planting pace: A major storm system is expected to deliver heavy rains across the Plains and western Corn Belt, improving soil moisture but threatening planting delays and possible frost stress for emerging crops.
| TOP STORIES—Trump/Xi summit opens with warm public tone, but China raises TaiwanChinese and U.S. leaders praise cooperation while major disputes over trade, Taiwan and Iran remain in focus President Donald Trump and Chinese President Xi Jinping opened their Beijing summit Thursday with unusually warm comments, signaling an effort to stabilize ties between the world’s two largest economies despite deep disagreements over trade, technology, Taiwan and global security. Trump called Xi a “great leader” and said the U.S./China relationship would be “better than ever before,” while Xi urged both countries to become “partners, not adversaries” and jointly answer what he described as “historic questions” facing the global order. Xi also said cooperation between Washington and Beijing would bring “mutual success and common prosperity.” The summit comes amid heightened geopolitical tensions tied to the U.S./Israel-Iran conflict and ongoing disruptions to global energy markets. Analysts are closely watching whether Trump presses China to use its influence with Iran to help reopen and stabilize shipping through the Strait of Hormuz, a critical artery for global oil and LNG trade. Taiwan remains another central issue. Trump has indicated U.S. weapons sales to Taiwan will be discussed during the meetings, while Xi continues to frame reunification as a core Chinese objective. Xinhua noted this on Xi’s Taiwan remarks during the meeting with Trump:“Xi Jinping emphasized that the Taiwan issue is the most important issue in China/U.S. relations. If handled well, the relationship can remain overall stable; if mishandled, it could lead to clashes or even conflict, pushing ties into a very dangerous situation. He added that ‘Taiwan independence’ is incompatible with peace in the Taiwan Strait, and maintaining peace and stability there is the greatest common ground between China and the United States.”Of note: Treasury Secretary Scott Bessent says Trump will say more on Taiwan issue “in coming days.” Meanwhile, trade negotiations are expected to focus on extending the current tariff truce and potentially expanding Chinese purchases of U.S. agricultural products, energy and aircraft. Of note: The U.S. and China discussed a board of trade framework whereby each country identifies some $30 billion in goods on which tariffs could be eased without threatening national security interests. Beijing countered with the board of investment idea to lower U.S. investment barriers. “There are plenty of things that the Chinese could invest in,” Bessent said in the interview. “Large Boeing orders” appear to be coming, Bessent told CNBC, adding that China and the U.S. will discuss establishing a new joint board of trade to manage commercial ties. “I think we’re going to see the large Boeing orders,” Bessent said. Trump and Xi discussed increasing agricultural trade, and improving oil flows, according to a White House official. Trump highlighted the need for China to boost purchases of the country’s farm products and curb flows of fentanyl precursors into the U.S. The two sides talked about keeping the Strait of Hormuz open to support the energy trade, and Xi made clear China’s opposition to the militarization of the waterway, the official said. China soybean expectations temperedBessent comments reinforce view that existing Chinese commitments may cap near-term upside for additional U.S. soybean sales Treasury Secretary Scott Bessent told CNBC on Thursday that China’s existing agricultural purchase commitments under the Busan agreement meant that “soybeans are all taken care of,” triggering additional weakness in soybean futures during overnight trade and early Thursday action. The comments appeared to confirm growing market expectations that no new blockbuster soybean purchase agreement is likely to emerge from the ongoing meetings between President Donald Trump and Chinese President Xi Jinping beyond the previously discussed commitment for China to purchase roughly 25 million metric tons of U.S. soybeans annually over the next three years. The immediate market reaction was negative for soybeans, as some traders had continued to speculate that Beijing could announce additional large-volume soybean purchases as part of broader efforts to stabilize bilateral trade relations. Instead, Bessent’s remarks suggested the soybean component may already be largely finalized. Meanwhile, several U.S. officials and trade analysts have emphasized for months that any broader agricultural agreement with China would likely extend well beyond soybeans to include products such as beef, pork, poultry, corn, ethanol and other agricultural goods. In that sense, the absence of an additional soybean-specific deal may be disappointing to some traders, but it is not entirely surprising. Market participants increasingly view the more important issue as whether the U.S. and China establish a formal compliance mechanism or enforcement structure to ensure adherence to future agricultural purchase commitments. Traders and farm groups remain highly focused on whether any final agreement includes monitoring provisions, timelines or accountability measures that could provide greater confidence that pledged purchases will actually materialize over time. China renews U.S. beef plant licenses, but did they?Move revives beef trade as Washington and Beijing seek to stabilize economic ties during high-stakes Beijing meetings China has renewed import licenses for hundreds of U.S. beef processing plants, reopening a key agricultural trade channel that had largely stalled during the recent tariff conflict between Washington and Beijing, according to Bloomberg. The permits were renewed Thursday and are typically valid for five years, people familiar with the matter told Bloomberg. However, early Thursday morning, Reuters reported that around 400 beef plant certifications had been renewed. But Reuters later reported that the renewals were reversed, noting that the registration status of around 400 plants had been shown as “effective” earlier on Thursday, but they were later listed as “expired” on the customs website. The report said there was no comment from the Chinese customs authority on the development. According to Bloomberg, the renewed approvals are being viewed as an early positive signal from the summit and could pave the way for additional agricultural trade agreements, including potential Chinese purchases of U.S. corn and soybeans. China had allowed authorizations for hundreds of U.S. meat facilities to lapse last year amid escalating trade tensions tied to Trump’s aggressive tariff policies. The loss of market access sharply reduced trade flows, with U.S. beef and related product shipments to China falling roughly 67% between 2024 and 2025, according to USDA data cited by Bloomberg. Total U.S. beef exports last year declined 12%. The renewed access if confirmed is particularly important for U.S. meatpackers because China remains a major destination for organ meats and other beef products that have limited domestic demand in the United States. Industry groups said the collapse in exports to China contributed to a nearly 40% decline in prices for those products, further pressuring packer margins at a time when cattle supplies remain historically tight. The New York Times reports that renewed approvals, which extend through late 2029, could reopen an important export outlet for U.S. cattle producers. However, analysts caution that license restoration alone does not guarantee a major rebound in exports because China tightly manages imports through state-controlled purchasing systems and restrictive quota allocations designed to protect domestic producers. China’s beef import policy continues to heavily favor strategic trade partners such as Brazil, which reportedly received a quota of roughly 1.1 million metric tons this year compared to just 164,000 metric tons allocated to the United States. Beijing has also periodically cited longstanding animal health concerns, including a 2003 Mad Cow disease case linked to Washington state, as justification for tighter controls on U.S. beef imports. Meanwhile, China’s domestic beef industry has been struggling with oversupply and softer consumer demand, prompting Beijing to impose quotas on beef imports to support local producers. Those restrictions have weighed heavily on exporters such as Brazil, Australia, and Argentina. Bloomberg reported that because the U.S. has used relatively little of its import allocation recently, the renewed licenses could allow American suppliers to regain market share in the world’s largest beef import market. A renewal of U.S. plants’ export licenses seems likely, butit’s hard telling how traders will react to the on/off Chinese customs labeling — if at all. Chinese state media quickly highlighted what appeared to be a major diplomatic development: Xi and Trump reportedly agreed to establish what Beijing called a “Constructive Strategic Stability Relationship” as a new framework guiding bilateral ties. The formulation appears to be newly crafted for U.S./China relations and, according to the Chinese readout, would emphasize cooperation, managed competition, controllable differences, and long-term peace. Xi suggested the framework could provide strategic direction for relations “over the next three years and beyond,” fueling speculation that both governments may be preparing to extend their current trade truce through the remainder of Trump’s term ending in January 2029. The Chinese side also delivered a strong business-friendly message during the summit, with Xi telling U.S. executives attending portions of the visit that China welcomes deeper mutually beneficial economic cooperation and that American companies remain deeply integrated into China’s economic development and reform process. Several major U.S. business leaders are accompanying the delegation, including Jensen Huang, Tim Cook and Elon Musk, underscoring the high commercial stakes surrounding the summit.The visit also highlights the continued economic rivalry between the two powers. China is accelerating efforts to achieve self-sufficiency in advanced technologies such as semiconductors, while the Trump administration has maintained investment and export restrictions targeting strategic Chinese industries. Attention now turns to whether Xi may accept Trump’s invitation for a follow-up summit in the U.S. on Sept. 24, which could further reinforce efforts to stabilize the bilateral relationship. This would be Xi’s first state visit to the U.S. since 2015. From then on, Xi visited the U.S. in 2017 for a bilateral leaders’ meeting, and in 2023 during APEC, when ties with the Biden administration finally stabilized after a spy balloon episode. —House approves year-round E15 expansionMeasure marks a major win for corn ethanol producers, though Senate outlook remains uncertain The House voted 218-203 on Wednesday to approve legislation allowing year-round nationwide sales of E15 gasoline, delivering a significant victory for the biofuels industry and corn growers seeking stronger demand amid large U.S. corn supplies and weak farm margins. E15 gasoline contains 15% corn-based ethanol, and supporters argue the measure would expand fuel choice, boost ethanol demand, and support rural economies. The legislation still faces an uncertain path in the Senate and would require President Donald Trump’s likely signature to become law. Still, the House vote represents the furthest Congress has advanced a nationwide permanent E15 policy after years of failed attempts tied to opposition from segments of the oil refining industry. Backers of the measure, including the Renewable Fuels Association and Growth Energy, said the bill would provide certainty for fuel retailers and ethanol producers while helping absorb record U.S. corn production. The push has gained additional momentum from elevated crude oil prices tied to the Iran war, which has renewed calls for expanded domestic biofuel use. The proposal also includes changes limiting exemptions from Renewable Fuel Standard blending requirements for small refineries, a provision that divided parts of the oil sector and created friction within agriculture groups. The American Soybean Association said it could not support the bill in its current form, citing research suggesting gains for corn producers could come at the expense of soybean prices and soybean-based biofuel demand. Meanwhile, supporters contend future federal biofuel blending mandates remain uncertain, making it difficult to accurately predict long-term impacts on soybean markets. The E15 debate has become increasingly important after the Trump administration finalized aggressive new Renewable Fuel Standard blending mandates earlier this year, while leaving conventional ethanol volumes largely unchanged. The E15 legislation is now decoupled from the Farm Bill 2.0 that’s also currently running through Congress. Senate outlook for year-round E15 remains uncertainHouse passage marks a major symbolic victory for ethanol supporters, but Senate procedural hurdles and committee politics cloud the path forward The House’s narrow approval of year-round E15 legislation delivered a long-sought victory for ethanol advocates, corn growers, and biofuel groups, but the measure now enters a far more uncertain political environment in the Senate.Even supporters acknowledge the House vote — while close — was still significant. As one industry analyst put it, “a win is a win,” particularly after years of failed attempts to secure permanent nationwide approval for year-round sales of E15 gasoline. The Senate landscape, however, is considerably more complicated. Senate Majority Leader John Thune (R-S.D.) has publicly indicated support for including year-round E15 in the Senate farm bill effort. But the Senate Ag Committee does not control the underlying Clean Air Act provisions tied to summertime fuel volatility rules. That authority falls largely under the Senate Environment and Public Works (EPW) Committee. Panel Chair Shelly Moore Capito has cosponsored the so-called Fischer-Capito compromise which is like the compromise passed by the House but does not include the more controversial SRE reforms including the un-reallocated volumes. She’s not opposed to E15 but others on her panel are or seem to be. Senate Ag Chairman John Boozman (R-Ark.) is a member. Is he going to support, if so what language? EPW Ranking Member Sheldon Whitehouse (D-R.I.) is unlikely to support the measure given his longstanding alignment with environmental groups that oppose expansion of ethanol mandates and exemptions under the Clean Air Act. As a result, Senate leadership may have difficulty moving the provision through regular order. A stand-alone E15 bill could also struggle to secure the 60 votes needed for cloture. Opposition comes from multiple directions. Some senators — including lawmakers from refining states — remain concerned about the potential economic impact on small and medium-sized refiners. Others continue to raise environmental objections tied to emissions, fuel volatility, and air-quality compliance during summer months. That bipartisan resistance means supporters may ultimately need to pursue an alternative legislative strategy. One increasingly discussed path would involve attaching the E15 provision to a must-pass package later this year. Possibilities include broader energy legislation, government funding measures, or an end-of-year lame-duck package where controversial provisions are often folded into larger negotiations. Such an approach could allow Senate leaders to avoid a direct stand-alone showdown while giving ethanol supporters another route to enactment.For now, the bottom line is clear: E15 proponents achieved a meaningful breakthrough in the House, but the Senate path remains murky. The politics, committee jurisdiction fights, and procedural math all suggest the final outcome is still very much unresolved. —Hormuz traffic resumes under Iranian oversightIran says more than 30 ships passed through Strait overnight Iranian state television reported Thursday that more than 30 vessels were allowed to transit the Strait of Hormuz overnight following coordination with Iranian authorities and the naval forces of the Islamic Revolutionary Guard Corps, according to Bloomberg. An IRGC naval official said the transits signal what Tehran described as a “new era” in Hormuz shipping operations, claiming that international fleets now recognize coordination with the IRGC as the “best, quickest and simplest way” to move through the strategically critical waterway. The comments underscore Iran’s efforts to assert greater control over maritime traffic in the Strait of Hormuz, a chokepoint that handles a major share of global crude oil, fuel, and LNG shipments. Markets continue to closely monitor shipping flows through the region amid ongoing geopolitical tensions and concerns about potential disruptions to global energy supplies. — Summit drops South Dakota pipeline routeCarbon capture project shifts into Nebraska after years of political and landowner opposition in South Dakota Summit Carbon Solutions has formally removed South Dakota from the latest version of its proposed multistate carbon capture pipeline system, marking a major strategic shift after years of political battles, court fights and resistance from landowners in the state. The revised route instead expands through Nebraska, where the company believes the regulatory and political environment is more workable. “If approved, the changes would remove previously planned routes through Shelby, Pottawattamie, Montgomery, Adams, Page, Fremont, Mitchell and Worth counties, while also reducing the miles of pipeline running through Crawford, Floyd, Sioux and Dickinson counties,” according to the Iowa Capital Dispatch (link). The decision represents one of the most significant setbacks yet for Summit’s effort to build a large Midwest carbon dioxide pipeline network linking ethanol plants across the Corn Belt to underground sequestration sites in North Dakota. The company’s original proposal had included extensive mileage through eastern South Dakota, but opposition intensified as lawmakers, county officials and rural landowners raised concerns about eminent domain authority, pipeline safety and property rights. The conflict in South Dakota became especially contentious after state lawmakers approved restrictions that complicated the use of eminent domain for carbon dioxide pipelines. That political fight turned the project into a broader national debate over carbon capture infrastructure, private property rights and the future of low-carbon fuel policy tied to ethanol production and federal clean fuel incentives. Under the updated route, Summit plans to reroute portions of the system farther east through Nebraska, allowing the company to continue connecting ethanol facilities while avoiding South Dakota’s increasingly difficult permitting environment. The revised strategy is intended to preserve the broader economics of the project, which is heavily tied to lowering the carbon intensity scores of ethanol production to qualify for premium clean fuel markets and federal tax incentives, including the 45Z clean fuel production credit. The route changes also underscore the growing regional divide across Midwestern states over carbon capture projects. Supporters argue the pipelines are necessary to preserve long-term competitiveness for ethanol producers as global fuel standards tighten and low-carbon fuel markets expand. Critics, meanwhile, contend the projects prioritize corporate interests over rural landowners and raise unresolved questions about safety oversight and long-term liability. The South Dakota dispute became a political flashpoint in recent years, with many Republican lawmakers aligning with rural property-rights activists despite broader party support nationally for energy infrastructure development. The debate also exposed divisions within the agriculture and ethanol sectors themselves, as some producers strongly backed the pipeline while others questioned whether the economic benefits justified the controversy. Summit has maintained that the project remains financially viable despite the rerouting and continues to pursue regulatory approvals in multiple states. The company argues the pipeline system is essential for helping Midwest ethanol plants maintain export competitiveness and meet evolving low-carbon fuel standards domestically and internationally. |
| FINANCIAL MARKETS |
—Equities today: U.S. Dow opened around 360 points higher on strong CSCO earnings and optimism surrounding the ongoing Trump/Xi summit. U.S. and China officials continued talks overnight while Xi reportedly expressed interest in buying more U.S. oil and both countries agreed Iran cannot obtain a nuclear weapon. Oil is rising amid reports of a vessel seized near the Strait of Hormuz — a vessel was reported taken by “unauthorized personnel” off the UAE, according to UK Maritime Trade Operations, which said it was bound for Iranian waters. Several Fed officials speak today including Schmid (10:15 a.m. ET), Hammack (1:00 p.m. ET), Williams (5:45 p.m. ET), and Barr (7:00 p.m. ET). Markets will also continue to monitor developments from the U.S./China summit and oil prices.
In Asia, Japan -1%. Hong Kong flat. China -1.5%. India +1.1%.
In Europe, at midday, London +0.3%. Paris +0.7%. Frankfurt +1.5%.
—Retail sales hold up despite inflation pressure
Higher gasoline prices tied to the Iran war boosted April spending, though economists caution that inflation — not stronger consumer demand — accounted for much of the gain
U.S. retail sales rose 0.5% in April from the previous month, matching market expectations but slowing from a downwardly revised 1.6% increase in March. The biggest monthly gain came at gasoline stations, where sales climbed 2.8% as fuel prices continued rising amid the ongoing Iran war and disruptions tied to the Strait of Hormuz. Because retail sales figures are not adjusted for inflation, much of the increase reflected higher prices rather than stronger purchasing volumes.
The report adds to broader evidence that rising energy costs are filtering through the U.S. economy. Recent inflation data showed gasoline prices jumping sharply in April, helping push both consumer and producer inflation to their highest annual rates in several years.
Economists are increasingly warning that consumers may be starting to feel pressure from higher fuel, food, and transportation costs. While household spending has remained resilient so far, analysts say inflation-adjusted consumption appears weaker beneath the surface, especially for middle- and lower-income consumers facing mounting energy-related expenses.
—Dollar surges as inflation data reinforces higher-for-longer Fed outlook
War-driven energy inflation and rising price pressures push markets to abandon expectations for 2026 Fed rate cuts
The U.S. dollar strengthened sharply this week, with the dollar index hovering around 98.5 on Thursday, as mounting inflation pressures tied to the Iran war reinforced expectations that the Federal Reserve will maintain elevated interest rates for an extended period — and could potentially raise rates again before the end of the year.
Markets reacted strongly to a series of hotter-than-expected inflation reports that suggested rising energy costs and broader price pressures are increasingly feeding into the U.S. economy. Data released Wednesday showed wholesale inflation accelerated in April at its fastest pace since 2022, while Tuesday’s consumer price index report showed annual inflation rising to 3.8%, the highest level since May 2023.
The renewed inflation surge has dramatically shifted interest rate expectations. Investors have now fully priced out any Federal Reserve rate cuts for 2026 and are increasingly assigning higher odds to an additional rate increase later this year. Treasury yields moved higher (see related item below) alongside the dollar as traders reassessed the inflation outlook and the likelihood that policymakers will need to keep monetary policy restrictive for longer than previously expected.
The inflation rebound has been closely tied to the global energy shock stemming from the Iran conflict and disruptions across the Middle East. Higher oil and fuel costs have begun spilling into transportation, manufacturing, and broader consumer prices, raising concerns that the U.S. economy could face a prolonged period of sticky inflation even as growth slows.
Meanwhile, stronger U.S. yields relative to other major economies continued to support the dollar against global currencies.
—China pushes yuan to new high against dollar
Stronger yuan signals Beijing’s effort to project financial stability during the Trump/Xi summit while rising U.S. inflation and trade tensions reshape global currency markets
China allowed the yuan to strengthen to a fresh multi-month high against the U.S. dollar this week as Beijing appeared to use currency policy to reinforce confidence ahead of the high-profile summit between President Donald Trump and Chinese President Xi Jinping.
The firmer yuan also comes as Chinese officials attempt to stabilize capital flows, support domestic confidence and counter growing concerns over trade frictions and global economic uncertainty.
Currency traders viewed the move as a signal that Beijing is comfortable with a stronger exchange rate for now, particularly as China seeks to present itself as a stable economic partner during negotiations with Washington. A stronger yuan can also help offset imported inflation pressures, especially for energy and agricultural commodities, although it may slightly reduce the competitiveness of Chinese exports.
Meanwhile, the dollar has remained volatile as investors digest higher U.S. inflation readings tied partly to rising oil prices stemming from the Iran conflict. Markets increasingly expect the Federal Reserve to maintain a higher-for-longer interest rate stance, creating competing pressures between stronger U.S. yields and China’s currency management efforts.
The yuan’s rise also added another layer to broader market discussions surrounding possible Chinese purchases of U.S. agricultural products, energy commodities and industrial goods during the Trump/Xi talks.
—Equities yesterday: The tech heavy Nasdaq and the S&P 500 gained both set fresh record highs.
| Equity Index | Closing Price May 13 | Point Difference from May 12 | % Difference from May 12 |
| Dow | 49,693.20 | -67.36 | -0.14% |
| Nasdaq | 26,402.34 | +314.14 | +1.20% |
| S&P 500 | 7,444.25 | +43.29 | +0.58% |
—Long bonds hit 5%
Inflation fears and rising energy costs push long-term U.S. borrowing rates to their highest level since before the financial crisis
The U.S. Treasury sold $25 billion in 30-year bonds Wednesday at a yield above 5% for the first time since 2007, underscoring mounting investor concern over persistent inflation and the economic fallout from elevated energy prices tied to the Iran conflict. The auction cleared at a high yield of roughly 5.046%, reflecting growing demands from investors for compensation against long-run inflation risks.
The sale came just hours after fresh inflation data showed the sharpest annual rise in U.S. producer prices since Russia’s invasion of Ukraine in 2022. Wholesale inflation accelerated as surging fuel and transportation costs continued filtering through the broader economy, reinforcing concerns that the Federal Reserve may need to keep interest rates higher for longer — or potentially raise them further.
The move higher in long-term Treasury yields reflects a broader global bond market selloff. Investors increasingly worry that prolonged disruptions in the Strait of Hormuz and elevated crude oil prices could sustain inflation pressures well into 2027. Analysts also noted that weaker demand for long-duration government debt, combined with heavy sovereign borrowing needs across G7 economies, is amplifying upward pressure on yields.
Higher long-term yields are significant because they directly influence borrowing costs across the economy, including mortgages, corporate debt, and farm lending. The rise also creates additional challenges for the incoming leadership transition at the Federal Reserve as Kevin Warsh prepares to take over from Jerome Powell amid intensifying inflation concerns and heightened market volatility.
— Warsh confirmed as Fed Chair in narrow, politicized Senate vote
Kevin Warsh secured Senate confirmation as the Federal Reserve’s 17th chair Wednesday in one of the narrowest and most politically charged votes for the position in modern history, underscoring intensifying tensions between the central bank and President Donald Trump’s White House
The Senate confirmed Warsh by a 54-45 vote, with support from all Republicans and only one Democrat — Sen. John Fetterman (D-Pa.). Sen. Kirsten Gillibrand (D-N.Y.) did not vote. The margin marked the narrowest confirmation for a Fed chair since Senate approval became mandatory for the role in 1977, highlighting growing partisan divisions surrounding the central bank and its independence.
Warsh will succeed current Fed Chair Jerome Powell, whose term leading the central bank ends Friday. Powell plans to remain on the Fed’s Board of Governors despite repeated pressure from President Donald Trump to step down entirely from the institution.
The confirmation battle became a broader referendum on Federal Reserve independence as Democrats pressed Warsh during his confirmation hearing over whether he could resist White House political pressure. Warsh pledged to preserve the Fed’s monetary-policy independence and said he had made no policy commitments to Trump.
Warsh, 56, brings extensive Wall Street and central banking experience to the role. A former Morgan Stanley banker, he became the youngest Fed governor in history in 2006 after being appointed by President George W. Bush at age 35. During the 2008 financial crisis, Warsh played a prominent role in coordinating emergency financial-sector rescue efforts. However, by the end of his Fed tenure in 2011, he had emerged as a critic of the central bank’s prolonged market interventions and quantitative easing policies.
Following his departure from the Fed, Warsh joined the Hoover Institution at Stanford University and later worked with investor Stanley Druckenmiller’s family office. During the Covid-19 pandemic, Warsh gained attention for warning that aggressive monetary stimulus and fiscal support risked triggering sustained inflation pressures.
Warsh aligned himself closely with Trump’s economic priorities during the succession process, arguing that deregulation and productivity gains from artificial intelligence could allow the Fed to reduce interest rates without reigniting inflation. He also criticized the Fed under Powell for expanding beyond its traditional monetary-policy mandate and suggested the institution should reconsider how it communicates policy decisions and measures inflation.
The incoming chair now faces a difficult economic backdrop. Elevated inflation pressures tied partly to Middle East energy-market disruptions and the Iran conflict have complicated expectations for future interest-rate cuts. Meanwhile, policymakers continue assessing whether recent labor-market strength signals renewed economic resilience or merely a temporary stabilization after slower growth earlier in the decade.
Warsh also inherits an institution facing extraordinary political scrutiny. Under Powell, the Fed endured repeated public criticism from Trump, including demands for lower interest rates, personal attacks on Fed leadership, a federal investigation into Powell, and efforts to remove Fed Governor Lisa Cook.
The confirmation process itself reflected those tensions. Sen. Thom Tillis (R-N.C.) initially withheld support for Warsh over concerns tied to the investigation into Powell, temporarily complicating the nomination’s path through the Senate Banking Committee. Tillis later backed the nomination after the Justice Department dropped the inquiry.
Warsh is scheduled to preside over his first Federal Open Market Committee meeting on June 16-17. His term as Fed chair will run until May 15, 2030.
| AG MARKETS |
—Grain futures retreat overnight on China demand concerns, profit-taking
Soybeans lead broad commodity selloff as traders reassess export outlook and weather risks
Chicago grain futures moved broadly lower in overnight trade Thursday, led by a sharp decline in soybeans and soybean products as traders reacted to disappointment over the lack of additional Chinese soybean purchase commitments beyond the previously announced framework agreement. Profit-taking following this week’s rally, improving weather forecasts for portions of the Corn Belt, and broader commodity-market caution also pressured prices.
July corn futures fell 8 cents to $4.7275 per bushel as traders monitored forecasts calling for widespread rainfall across parts of the western Corn Belt and eastern Plains. While the moisture is expected to benefit soil conditions, it could temporarily slow planting progress in some areas.
Soybeans posted the steepest losses overnight after Treasury Secretary Scott Bessent suggested China’s soybean commitments under the Busan agreement were already “taken care of,” dampening hopes for additional large-scale purchases from Beijing. July soybeans dropped 30 1/2 cents to $11.985 per bushel.
Soybean products also weakened sharply. July soybean meal declined $5.50 to $333.00 per ton, while July soybean oil fell 1.13 cents to 73.19 cents per pound as traders unwound recent gains tied to biofuel optimism and tightening vegetable oil supplies.
Wheat futures also retreated overnight despite ongoing global weather concerns. July Chicago SRW wheat fell 8 3/4 cents to $6.6675, while July Kansas City HRW wheat dropped 10 3/4 cents to $7.14. Traders continued to monitor improving rainfall prospects for parts of the U.S. Plains, although concerns remain about crop stress in some hard red winter wheat areas following prolonged dryness earlier this spring.
Meanwhile, outside markets remained highly volatile as investors focused on the summit between President Donald Trump and Chinese President Xi Jinping in Beijing, ongoing Iran war developments, and rising global inflation pressures linked to elevated energy prices.
—U.S. ag export sales to China limited ahead of Trump/XI summit. USDA weekly Export Sales data showed continued subdued activity for China for 2025/26, with activity the week ended May 7 including net sales reductions of 496 MT of sorghum (new sales of 1,467 MT), net sales of 68,641 MT of soybeans (4,951 MT new sales), and 1 running bale of upland cotton. Activity for 2026 was net sales of 1,423 MT of pork (1,538 MT new sales).
—USDA daily export sales: 252,000 MT soybeans to unknown destinations — 120,000 MT for 2025/26, 132,000 MT for 2026/27
—Global grain markets
International wheat, corn and oilseed prices remain mixed as traders monitor Black Sea export competition, Chinese demand and weather risks across major producing regions
International grain markets were mixed overnight, with Black Sea wheat values remaining competitive against both European and U.S. origins while corn and oilseed markets reacted to shifting demand signals and weather uncertainty. European milling wheat futures on Euronext (MATIF) softened after a recent rally, while Russian FOB wheat values continued to pressure global export offers.
Russian 12.5% protein milling wheat FOB was recently quoted near $222 per metric ton, compared to French Rouen wheat near $203 per metric ton and U.S. Gulf SRW wheat around $199 per metric ton, according to European Commission export price data. Black Sea corn FOB values were near $203 per metric ton, while French Atlantic corn was closer to $195 per metric ton.
In Asia, Dalian corn and soymeal futures were relatively steady amid cautious Chinese buying interest ahead of additional details from the Trump/Xi summit discussions. Soybean trade activity remained subdued during recent Chinese holiday periods, while Brazilian FOB soybean premiums firmed modestly.
Meanwhile, Malaysian palm oil prices remained elevated amid ongoing concerns about vegetable oil supplies and energy-linked demand. Cash FOB refined palm oil values were recently quoted near $887 per metric ton.
International Grain Prices and U.S. Equivalents
| Commodity | International Price | Approximate U.S. Equivalent |
| MATIF Milling Wheat (France) | €188/MT | about $5.92/bu |
| Russian 12.5% FOB Wheat | $222/MT | about $6.04/bu |
| U.S. Gulf SRW Wheat FOB | $199/MT | about $5.42/bu |
| Black Sea Corn FOB | $203/MT | about $5.16/bu |
| French Atlantic Corn FOB | $195/MT | about $4.95/bu |
| Malaysian Palm Oil FOB | $887/MT | about 40.2 cents/lb |
| Dalian Corn Futures | ~2,420 yuan/MT | about $5.35/bu |
| Dalian Soymeal Futures | ~3,250 yuan/MT | about $295/short ton |
The international wheat market continues to be heavily influenced by aggressive Russian export competition and improving crop prospects in parts of the Black Sea region. Meanwhile, traders remain highly focused on Northern Hemisphere weather patterns, including excessive rains in portions of the western Corn Belt and Plains, along with potential frost risks in the northwestern Corn Belt.
—China wheat harvest enters critical stretch
Weather, diesel supplies and potential government support measures will shape outcome of key crop season
China’s winter wheat harvest is entering a pivotal period that will determine both the quality and size of this year’s crop, with harvesting expected to accelerate across major producing regions from late May through mid-June. As the world’s largest wheat grower, China’s production outlook carries major implications for global grain markets and domestic food security.
The crop faced an uneven start last fall after excessive rainfall delayed planting across the key Huanghuaihai production belt, which includes major wheat provinces such as Henan, Shandong and Anhui. However, generally favorable growing conditions since then have improved prospects for a potentially large harvest, easing some earlier concerns about acreage and development.
Attention is now turning to harvest weather, field conditions and logistical risks during what is considered the most sensitive stage of the production cycle. Extended rainfall, severe heat or transportation disruptions during the coming weeks could still reduce yields or damage grain quality before the crop is collected.
One of the biggest emerging concerns is diesel availability and pricing. China’s vast combine harvester fleet depends heavily on diesel fuel during the peak harvest window, and fuel costs have climbed sharply amid the ongoing Iran conflict and broader energy market volatility. Any localized shortages or supply bottlenecks could slow harvesting activity and increase crop losses in some regions.
Analysts are closely monitoring whether Chinese authorities introduce fuel subsidies, transportation assistance or emergency supply guarantees for rural areas. Such intervention would not only help stabilize harvest operations, but could also provide an early indication of how elevated global energy prices are affecting China’s agricultural economy and countryside logistics.
Meanwhile, officials are also expected to monitor conditions closely for signs of disease pressure, lodging or moisture-related quality issues as harvesting expands across central and eastern growing regions.
Final nationwide production estimates likely will not be available until mid-July, meaning market attention on China’s wheat crop is expected to intensify over the next several weeks as harvest results begin to emerge province by province.
—India halts sugar exports through September
New Delhi reverses course on overseas sales as weaker production forecasts, El Niño risks, and rising input costs raise concerns over domestic supplies
India, the world’s second-largest sugar producer, has banned sugar exports through Sept. 30 to safeguard domestic supplies amid tightening production forecasts and mounting weather concerns. The move reverses the government’s earlier position from April, when officials had ruled out export restrictions.
The decision followed a downward revision in India’s sugar output outlook by the Indian Sugar & Bio-Energy Manufacturers Association, which now estimates gross production at 32 million metric tons for the current season, down from an earlier 32.4 million tons projection. Concerns are also growing about the upcoming harvest due to the potential impact of an El Niño weather pattern, which could weaken India’s critical monsoon rains.
The export suspension comes as India also grapples with rising fertilizer costs tied to the Iran war and broader global commodity inflation pressures. The government notice allows only limited exceptions, including cargoes already being loaded for shipment.
Global sugar markets initially moved lower following the announcement, with New York raw sugar futures falling as much as 2.3% and London white sugar futures dropping up to 2.4%. Analysts noted, however, that much of the export restriction had already been anticipated by traders, limiting the immediate market shock.
India’s sugar exports have become a major swing factor in global trade flows in recent years. The country had already been restricting shipments after a poor 2022-23 crop, using annual export quotas to manage supplies. This season, India initially approved 1.5 million tons for export before later expanding the quota by another 500,000 tons.
According to Bloomberg, analysts now estimate the ban could reduce India’s sugar exports this season to roughly 700,000 tons, down from earlier expectations near 1.2 million tons. Meanwhile, growing demand for biofuels amid elevated energy prices linked to the Iran conflict is adding another layer of support to global sugar markets, with some analysts forecasting a worldwide sugar deficit in the 2026-27 season.
—Forced-labor cotton reappears in global apparel supply chains
Oritain report finds rising share of garments sold in Western markets contained prohibited Xinjiang cotton as tariff-driven sourcing shifts complicated compliance efforts
A new report from New Zealand-based forensic-testing firm Oritain found that prohibited cotton from China’s Xinjiang region appeared more frequently in garments sold in Western countries during 2025, marking the first increase in four years.
According to the report, 13% of the 1,000 garments anonymously sampled from 40 apparel brands contained raw materials linked to Xinjiang, up sharply from 6% a year earlier. The findings suggest that ongoing efforts by companies to reroute manufacturing and sourcing in response to new U.S. tariffs may have weakened supply-chain oversight and increased the risk of forced-labor-linked materials entering global apparel markets.
The report benchmarks sourcing against standards established under the 2021 U.S. forced-labor law that bars imports tied to forced labor in Xinjiang, a region long at the center of human-rights and trade disputes involving China.
—Agriculture markets yesterday:
| Commodity | Contract Month | Closing Price May 13 | Difference from May 12 |
| Corn | July | $4.80 3/4 | +3/4 cent |
| Soybeans | July | $12.29 | +2 1/4 cents |
| Soybean Meal | July | $338.50 | +$10.10 |
| Soybean Oil | July | 74.32 cents | -104 points |
| SRW Wheat | July | $6.75 1/2 | -3 1/2 cents |
| HRW Wheat | July | $7.24 3/4 | -6 1/2 cents |
| HRS Wheat | September | $7.40 3/4 | -4 cents |
| Cotton | July | 86.81 cents | +49 points |
| Live Cattle | June | $252.80 | +$5.10 |
| Feeder Cattle | August | $360.925 | +$4.375 |
| Lean Hogs | June | $100.875 | +$2.45 |
| FARM POLICY |
—ARC outlook hinges on yield losses despite higher benchmarks
Tax and farm policy analyst Paul Neiffer says elevated ARC benchmark prices for 2026 may still produce only limited farm program payments unless county yields fall below trend levels
Writing in his May 14 newsletter, tax accountant and farm policy analyst Paul Neiffer said the higher benchmark revenue calculations under the “One Big Beautiful Bill Act” (OBBBA) may not translate into meaningful Agriculture Risk Coverage (ARC) payments for many producers in 2026 because current USDA marketing-year average (MYA) price projections remain relatively weak while yields are expected to stay near trend.
Neiffer noted that OBBBA increased the ARC payment trigger to 90% of benchmark revenue from the previous 86%, modestly improving the likelihood of payments. However, he argued that ARC-CO payments for major row crops will still depend heavily on whether counties experience below-normal yields.
For corn, Neiffer said the benchmark price of $5.03 means the 90% trigger equates to $4.53 per bushel — 13 cents above USDA’s projected 2026 MYA price of $4.40. Under that scenario, county yields could rise slightly above benchmark levels and still generate ARC payments. Using a 200-bushel-per-acre benchmark yield example, he estimated a potential payment of about $22.10 per acre if final yields match the benchmark.
Meanwhile, Neiffer said soybean and wheat growers would generally need yields to fall roughly 3% to 4% below benchmark levels before ARC payments begin. He added that producers in Hard Red Wheat regions are likely to favor ARC-CO because projected PLC payments currently appear negligible while low regional yields make ARC assistance more likely.
Sorghum producers, by contrast, may continue favoring Price Loss Coverage (PLC) because projected PLC payments remain “in the money,” while ARC would require yield losses exceeding 12% before triggering support.
Neiffer did not include cotton, rice or peanuts since almost exclusively those farmers will elect PLC.
Neiffer concluded that corn and soybean producers may currently lean toward ARC-CO, but final enrollment decisions can wait until later this year, when yield prospects across counties become clearer. He cautioned that absent meaningful production shortfalls, 2026 ARC payments are likely to remain muted.
| ENERGY MARKETS & POLICY |
—Thursday: Oil market pauses with focus on Trump-Xi talks
Brent steadies near $106 as traders weigh diplomacy, Iran sanctions and tightening global supplies
Brent crude futures held near $105 per barrel on Thursday, pausing after a sharp recent rally as market attention shifted toward the summit meeting in Beijing between President Donald Trump and Chinese President Xi Jinping. Investors expect the talks to focus more heavily on trade and broader economic relations than on the Iran war, although energy security and sanctions enforcement remain a key backdrop for global markets. U.S. WTI crude is just over $100 per barrel.
Meanwhile, the U.S. continued increasing pressure on Tehran, threatening financial institutions tied to Iranian oil transactions and imposing additional sanctions on entities involved in crude sales to China, Iran’s largest customer. Supply concerns also remained elevated after the U.S. Energy Information Administration reported that oil and fuel flows through the Strait of Hormuz dropped by nearly 6 million barrels per day during the first quarter following the outbreak of Middle East hostilities in late February.
Further supporting prices, the International Energy Agency warned that the global oil market could remain significantly undersupplied through October even if the conflict eases next month. Saudi Arabia also informed OPEC that its crude production had fallen to the lowest level since 1990, reinforcing concerns about tightening global supplies during the peak summer demand season.
—Wednesday: Oil prices retreat as Fed concerns pressure energy markets
Inflation fears and interest rate outlook offset ongoing Middle East supply risks
Oil futures moved lower Wednesday as investors shifted attention from tightening global supplies and Middle East disruptions toward growing concerns that higher inflation could keep U.S. interest rates elevated for longer. Brent crude settled down $2.14, or 2.0%, at $105.63 per barrel, while U.S. West Texas Intermediate crude fell $1.16, or 1.1%, to $101.02 after a volatile trading session.
The decline followed a sharp rally earlier in the week that had been fueled by fading hopes for a lasting U.S./Iran ceasefire and continuing supply disruptions across the Persian Gulf region. However, markets turned lower after Boston Federal Reserve President Susan Collins indicated the Federal Reserve could still raise interest rates if inflation pressures remain persistent.
Traders increasingly worry that elevated energy prices are beginning to spill over more broadly into the economy. Recent U.S. inflation data showed producer prices posting their largest monthly increase in four years, while consumer inflation accelerated for a second consecutive month. The prospect of additional monetary tightening weighed on crude markets because higher borrowing costs could slow economic growth and weaken future fuel demand.
Meanwhile, markets continued to closely monitor the summit in Beijing between President Donald Trump and Chinese President Xi Jinping. Investors are watching for any signs China could play a diplomatic role in future negotiations involving Iran. China remains the world’s largest buyer of Iranian crude oil despite ongoing U.S. sanctions pressure.
Despite Wednesday’s decline, broader oil market fundamentals remained supportive. OPEC lowered its forecast for global oil demand growth in 2026, while the International Energy Agency warned that supply disruptions tied to the Middle East conflict could still leave global oil markets undersupplied later this year.
U.S. inventory data also pointed to continued tightness in petroleum balances. Government data showed crude oil and gasoline inventories both declined by more than expected last week, reflecting resilient fuel demand and strong export activity despite elevated energy prices. Those inventory draws helped support prices earlier in the session before broader macroeconomic concerns ultimately pushed futures lower.
| POLITICS & ELECTIONS |
—Report: Redistricting battle could give GOP net House edge
Sabato’s Crystal Ball estimates Republicans could gain between six and 10 House seats from the latest round of redistricting, though several legal and electoral uncertainties remain
According to an analysis (link) by Kyle Kondik of Sabato’s Crystal Ball, Republicans appear positioned to emerge with a meaningful net advantage from the ongoing 2026 redistricting cycle, potentially gaining between six and 10 U.S. House seats depending on the outcome of several competitive races and pending map changes.
The report notes that Democrats could gain seats in states such as California and Utah, where new maps favor Democratic candidates. California alone could yield a Democratic gain of four to five seats under current ratings, while Utah could add another Democratic seat.
Meanwhile, Republicans are positioned to make larger gains through redraws in Texas, Florida, Missouri, North Carolina, Ohio, and Tennessee. Texas could provide Republicans with a net gain of three to five seats, while Florida’s revised map could add three to four more Republican seats if it survives legal scrutiny.
The analysis also highlights additional Republican opportunities in Alabama, Louisiana, and South Carolina following the Supreme Court’s Callais decision, with each state potentially adding another Republican-leaning district. If those efforts succeed, Kondik estimates the overall Republican redistricting advantage could rise to roughly R+7, with a possible range of R+6 to R+10.
Kondik cautioned that the precise impact of redistricting will not be fully known until after the November elections because close races may ultimately determine whether new district lines changed outcomes. The report also noted that Democratic-controlled Maryland could still pursue a redraw targeting the state’s lone Republican-held district, potentially offsetting part of the GOP advantage.
| WEATHER |
— NWS outlook: There is a Slight Risk (level 2/5) of severe thunderstorms over parts of the Central Plains on Thursday… …There is a Slight Risk (level 2/5) of severe thunderstorms over parts of the Central Plains/Middle Mississippi Valley on Friday… …Mixed precipitation for the Pacific Northwest and Northern Intermountain Region through Saturday.
—Heavy rain pattern threatens planting pace
Forecast calls for soaking rains across the Plains and western Corn Belt, boosting soil moisture but raising concerns over planting delays and potential frost stress.
A major weather pattern shift is expected to bring a concentrated corridor of heavy rainfall — with totals exceeding two inches in some areas — across the eastern Plains, Missouri, and the western Corn Belt. The widespread moisture is expected to recharge severely depleted topsoil reserves and could help stabilize deteriorating hard red winter wheat conditions after weeks of stress.
Meanwhile, the same system is likely to sharply slow fieldwork and planting activity after the rapid planting pace seen earlier this week. Producers across key Corn Belt areas may face extended delays as saturated fields limit equipment access.
The forecast also introduces an additional weather concern behind the near-term heat wave. Overnight temperatures are expected to fall significantly below normal across portions of the northwestern Corn Belt and central Plains, raising the risk of cold stress and localized frost damage for newly emerged corn and soybean crops as the system moves through.
