Walk-Squawk Morning Wire
Corn Finds Support After Contract Lows — Sep/Dec Spread Hits Record Volume
🧲 Rare Earths Crunch: China’s Grip, Global Scramble, and a Multi-Decade Risk
China’s new export controls on rare earth elements (REEs) are putting intense pressure on Western supply chains just as these critical minerals become indispensable — powering everything from EVs and wind turbines to defense tech and the emerging humanoid robot race.
👉 Key Facts:
China’s dominance: 65% of mined NdPr, 88% of refined NdPr, and more than 90% of permanent magnets still come from China. Supply of heavy rare earths (HREEs) is almost entirely under Chinese control.
Weaponized trade: Beijing has shown it’s willing to use this leverage, halting exports to Japan in 2010 and now tightening controls again on HREEs and magnet-making technology.
Ripple effects: Major automakers are already idling production lines as magnet inventories run low. And with new mines taking ~18 years on average to come online, quick fixes aren’t realistic.
💡 Morgan Stanley’s Latest Research:
The US and EU are scrambling to build rare earth supply chains that bypass China, mapping out more than 30 upstream mines, refineries, and small magnet factories. But most of these projects are still early-stage and face steep costs and long timelines.
Who’s best positioned? MP Materials, Lynas, and Iluka Resources stand out in the near term — but even they’ll need years (and billions) to scale up meaningfully.
Humanoids next: Morgan Stanley now sees the humanoid robotics boom pushing NdPr into a global deficit by 2037, adding more pressure to an already tight market.
📈 National Security Stakes:
The US Department of Defense classifies REEs as critical for jets, ships, missiles, and other defense systems — yet military needs account for less than 0.1% of global demand. The real driver is clean tech and EVs, which make up about 95% of usage. Any supply disruption quickly ripples through the broader economy.
🌍 A Fragile Chain:
Some EU-backed mining projects — like Malawi’s Songwe Hill and South Africa’s Zandkopsdrift — could help feed Europe’s new refineries. But the real bottleneck is permanent magnets. With China’s scale advantage and its tight grip on heavy rare earths, few ex-China plants can secure enough reliable feedstock.
Big worry: Substitution technologies do exist — but they’re not ready yet to fully replace NdPr or HREEs at scale.
🔮 Bottom Line:
Without breakthroughs in mining, refining, or substitutions, the world remains deeply reliant on China’s rare earth supply chain. The risk of supply shocks is real — and growing — just as the global clean energy transition and robotics race kicks into high gear.
🇧🇷🌍 Trump’s Tariff Ultimatum: “Common Sense” or Chaos?
Donald Trump’s surprise 50% tariff threat on Brazil — over its prosecution of former President Jair Bolsonaro — has jolted global trade desks and sent a blunt message: nothing is off limits.
When asked how he’s deciding who gets hit and by how much, Trump told reporters his formula is “based on common sense, based on deficits, based on how we’ve been over the years, and based on raw numbers.” He added that his new cut-off date for trade talks — August 1st, 2025 — is final: “All money will be due and payable starting August 1. No extensions will be granted.”
Yet even within Trump’s own administration, the signals are mixed. Deputy Treasury Secretary Michael Faulkender hinted that while tariffs might take effect in August, negotiations could stretch far beyond that deadline: “A general framework is the objective to have by August 1st,” he told Bloomberg TV.
💣 Mixed Signals — and a Big Message to BRICS:
Analysts warn the Brazil move could backfire by pushing BRICS nations closer together — just as Trump’s “America First” approach has given these countries an opening to challenge the US-led order. Barclays economists say emerging Asian economies will now question whether any trade deal truly shields them from sudden tariff escalations.
Steven Okun, CEO of APAC Advisors, put it plainly: “It signals that countries should continue to expect Trump to use tariffs to get what he wants — and there’s limited scope for a reprieve. He can add tariffs for whatever reason at any time.”
Meanwhile, Trump is also threatening:
A new unilateral tariff on the EU, despite progress in talks
An extra 10% tariff on India, citing its BRICS membership
Industry-specific hikes, including a stunning 50% tariff on copper products — which just sent copper prices up 17% in a single day
Possible 200% duties on pharmaceutical imports if drug companies don’t shift production back to the US
Even recent “truce” deals with the UK, Vietnam, and China have left many trade watchers skeptical — short on detail, and easily upended by Trump’s shifting demands.
📉 Market Reaction:
Brazil’s real fell as much as 3% against the dollar. US equity futures dipped, while copper futures surged. So far, broader markets remain relatively calm — but with the August 1st deadline looming, investors know the rules could change overnight.
👉 Why It Matters:
Stephen Olson, senior fellow at the ISEAS–Yusof Ishak Institute, calls this move unprecedented: “It signals to US trade partners that any and all issues that catch Trump’s attention could become a problematic part of the trade agenda.” It raises fresh doubts about whether formal trade deals can protect against tariffs imposed for non-economic reasons.
📈 Context:
Trump has repeatedly used tariff threats as leverage for unrelated goals — from threatening Colombia over migrant deportations to targeting China for its alleged role in the US fentanyl crisis. Brazil wasn’t even on Trump’s original tariff list back in April; its inclusion now signals that BRICS nations are firmly in the crosshairs as the US seeks to defend the dollar’s global dominance.
🇧🇷 Trade Snapshot:
Brazil is unusual among Trump’s recent targets because it buys more from the US than it sells — importing around $44 billion in US goods in 2024 and exporting about $42 billion back. Many of Trump’s other targets run large trade surpluses with the US.
For now, the world is watching: Trump’s tariff threats show that traditional boundaries — and long-standing trade deals — may not hold up when politics, not policy, sets the agenda.
🌾 Closing Grain & Soybean Markets — July 9, 2025
Soybeans had a rough session, pressured by good weather, weaker product prices, and no fresh news on the China trade front. Nearby bean contracts finished the day 6–13 cents lower, with August–November spreads leading the way down. The Aug–Nov spread settled at +1 ¾¢ after peaking at +12 ¾¢ on Monday, while the SX/SN spread closed at -51¢ — the widest level in its contract history.
Soyoil struggled too, losing 65–80 points, while meal slipped $1–$2 per ton. Interestingly, soybean board crush margins improved as the bean decline outpaced product weakness. Option activity was heavy in August and November $10 puts, both topping 3,000 contracts traded. A BOZ5 $0.69–$0.70 call spread also traded 3,000 times. Bears will watch for further downside, but bulls still point to smaller acreage, potential yield risk, and the wildcard of a China trade breakthrough.
🌽 Corn: Stabilizing After New Lows
Corn futures touched fresh contract lows early in the day but clawed back to end up 0–2 cents. The Sep–Dec spread saw record volume — trading over 100K times — finishing flat after early firmness faded as corn turned higher. Other spreads were mixed: Dec–Mar softened to -16.75¢.
Some support came from fresh tenders, although results were mixed. Ethanol swaps spiked intraday before fading into the close. Top corn options included the CU5 $4.20 & $4.40 calls, CZ5 $4.20 puts, and a CQ25 $3.92 put vs August short-dated $4.05 put spread. Technically, bulls want to see CZ5 close the Sunday gap ($4.2975–$4.3275) while bears wonder why it’s not below $4.00 yet.
🌾 Wheat: Mixed With Technical Resilience
Wheat was mixed on the day. SRW futures once again tested and held the $5.40 area, posting another bullish “hammer” on the charts. HRS futures also closed well off session lows for the third straight day, while HRW touched its lowest level since May before recovering.
Wheat spreads were firmer overall:
SRW Sep–Dec settled at -20 ¼¢
HRW Sep–Dec at -23 ¾¢
HRS Sep–Dec at -18 ¼¢
Traders are watching for fresh technical signals, especially in SRW and HRS, to determine the next direction.
☀️ Weather Outlook
Overall, the forecast remains favorable for crop development across most of the Corn Belt, except for some dryness lingering in Ohio and Michigan. Drier pockets of Illinois are expected to see rains in the next seven days. Temperatures should stay cooler than average.
⚙️ Ethanol & Export Snapshot
RJO’s Randy Mittelstaedt notes that last week’s ethanol production rose slightly to 319 million gallons, up 2.9% from last year. Stocks slipped to 1.006 billion gallons, a record for this week historically. Gasoline demand picked up but remains slightly below last year. August ethanol swaps settled at $1.7350, up 1.5¢ but well off their highs.
Weekly Export Sales:
USDA announced new sales last week:
226K tons of 2024/25 soybeans
195K tons of meal (150K for 2025/26, 45K for 2024/25)
150K tons of 2024/25 corn
Estimates for tomorrow’s report:
Corn: 14.8–35.4 million bu
Beans: 11.0–22.0 million bu
Meal: 75–400K tons
🚢 Cash Markets & Basis Moves
Corn CIF bids were softer through November, while interior basis was firmer, especially in Indiana and Ohio where ethanol plants bid up by 1–5¢. Farmers are moving old crop ahead of harvest, with a mix of priced and price-later bushels.
Soybean basis improved for processors in IL and IN by 5–10¢ for July and August delivery, more in line with normal seasonal levels. Meal buyers are seeing tighter discounts, supporting basis.
Brazilian soybean basis was mostly steady. Brazilian and Argentine meal values are firmer so far this week.
CIF wheat basis is steady. HRW protein premiums were a touch firmer midweek. Low Rhine River levels in Germany continue to disrupt commodity shipping.
📊 CFTC Managed Money: Updated Estimates
Funds were net sellers of soybeans and soyoil and are now estimated to be net short beans.
Estimated positions: Corn -209K, Soybeans -14K, SRW -64K, Meal -137K, Oil +39K
🔭 Other Market Highlights
Trump tariffs: New letters to six countries, including Algeria (30%) and the Philippines (20%). The Philippines are a top buyer of US soybean meal.
Ukraine’s grain union: Raised their crop forecast to 83.1 MMT for 2025, with exports expected to rise to 50 MMT.
Iran’s SLAL: Tendered for 60K corn, 60K soymeal, and 120K feed barley.
USDA Secretary Rollins: Announced no amnesty for undocumented farmworkers and new limits on foreign land purchases, including by China.
Coming Up:
Thursday: Weekly export sales, WASDE, Crop Production, CFTC COT
Next week: Crop Progress, NOPA Crush, CPI
Keep reading with a 7-day free trial
Subscribe to Walk-Squawk Market Talk to keep reading this post and get 7 days of free access to the full post archives.