MARKETS:
Monday Check-in
Northern summer crop risk now recedes, and Trade War diversion continues.
Summary
- Northern summer crop risk is now receding and thus so to is the chances of shocks to markets.
- Global wheat prices again failed to hold at the lows but remain likely to set season lows soon.
- Corn prices now look less likely to make new lows given strong US exports.
- Oilseed pricing continues to be messy.
- US soybean prices can make small further gains after policy-driven gains last week.
- Canola prices likely only partially follow soybean prices higher.
- Likely smaller moves in grain and oilseed prices will mean the US Dollar becomes more influential.
Macro
FX: The US Dollar gained ground for most of last week. The consensus on US Dollar direction is shifting. Hitherto, a slow, modest fall was the consensus. Now, there is less of a consensus and a wider range of views. The newer views have a couple of elements. One element is tactical. US interest rates falling less than in other countries is greenback positive. Another element is more strategic. Investors were, for a while, reducing the share of US assets in their portfolios from very high levels. That outflow now looks to have slowed. And broader data, covering a wider range of investors, calls into question the extent of that outflow. The spread of views makes US Dollar direction, or whether it even has a direction, unclear.
Energy: Oil prices gained last week, ending near the middle of their 2025 range. Oil futures backwardation steepened a little in that move, shoring up returns for benchmarked investors.
Rates: The market continues to expect somewhat lower US short-term interest rates. So, US$ carry costs will fall modestly, but not by enough to radically alter the structure of commodity curves.
Wheat
Crop
Season 2025 wheat crops are largely stable for now. Crops in Australia and Argentina will become a focus again when temperatures rise. With September looming, season 2026 northern winter crops are coming onto the agenda. Growers will soon start planting 2026 northern winter crops. Some important areas around the Black Sea are very dry, so they are a ‘watch’. The crop risk is low for now. There is plenty of time for moisture to accumulate and start crops.
SnD
Supply comfort, especially in the US, still dominates wheat’s SnD. 2026 crops are on the horizon, but it is too early for the market to form much more than a default SnD.
A couple of trade flow issues remain on the agenda. One, US export sales have been okay. But sales remain short of what would prompt the market to cut US inventory estimates. And, two, Ukraine and Russia wheat continue to flow slowly to market. This flow will be hefty when it starts and late. That might leave both origins as motivated sellers until late in the year. And that is potentially an issue for Australia.
Markets
Investors added to their short positions in SRW and HRW wheat futures by last Tuesday. Both positions are large, but not historically extreme. These investors remain vulnerable to upside moves and may strongly reinforce them. For now, though, momentum remains weak, encouraging selling by momentum investors.
The View
US wheat prices made marginal new lows last week. SRW wheat bounced a little from the lows. HRW wheat did not. So the market is yet to set a seasonal floor. US export sales are so-so, thus the market is still searching for a level that uncovers more demand. We still think US prices will soon set seasonal lows. More stable corn prices likely help. The US Dollar potentially has greater influence given the small price adjustments. The upside risk for prices remains limited in our view.
The Russia-Ukraine ‘peace’ process remains on the wheat market’s mind. While that process is ongoing, the conflict seems to be intensifying rather than winding down. Intensification, because accidents can happen, raises the risk to wheat exports. But, until there is an actual accident, the price impact is likely minimal. For now, the war is not impeding exports from either nation (even if other factors are). Some seem to think the war is impeding exports, so halting the war would mean more exports. We are sceptical of that idea. Nonetheless, if they have backed the idea with short positions, eventual disappointment with the peace process might boost wheat prices somewhat.
Coarse Grain
Crop
We seem to have passed peak coarse grain crop estimates for the northern summer. Crop losses will continue for a short while longer in Europe, Ukraine and Russia. And, the Profarmer Crop Tour in the US has likely seen the consensus notch down a little from the USDA’s very-high bar. Here, at the end of August, northern summer crop risks will now recede. Any losses will shortly be set as the development window gives way to maturing and harvesting.
SnD
Crops continue to be the biggest issue for coarse grain SnDs. That likely settles down somewhat in the coming weeks as peak crop risk passes for now. The fast pace of US new-crop corn exports continued last week. And Brazil’s corn exports have accelerated sharply in August. At around 8mmt, the chances of a big overlap with the US later in the year have been reduced. The crop losses in Europe, Ukraine, and Russia add an optimistic edge to exports from both Brazil and the US. Overall, the supply burden has eased somewhat, and that supply seems to be finding strong demand for now.
Markets
Investors’ short corn position was unchanged last week. The position was large but not extreme. Other investors, in a novel development, bought an unusually large amount of corn futures. The resulting long position is mid-range by historical standards. Investors taking both sides of the outright position emphasise the variety of strategies across the group.
The View
Corn prices stepped up last week. The Blob-like US corn crop shrank in the market’s imagination. And, US new crop export sales persist at high levels. The latter in particular prompted the price rise. The market sees plenty of demand so, for now anyway, there is no need for lower prices. Thus, we must relinquish our view that prices were not low enough. The issue is not over for the season. The market is mindful that Brazil and US have a lot of corn to sell. So, any slowing in the two nations’ export sales will reintroduce doubts and weigh on prices. And, because the price adjustments are small, the US Dollar can be influential. We continue to think that upside for prices is limited unless something left-field occurs.
Oilseeds
Crop
Oilseed weather issues continue to worsen somewhat. US soybean crops in parts of the Mississippi Delta are likely seeing yields decline. Sunflowerseed and soybean crops continue shrinking across Europe, Ukraine, and Russia. Both issues have been significant enough to help prices rise.
SnD
Some reduction in oilseed crops, including US soybeans, is helping to reduce the US export task. And those smaller crops likely boost Europe’s import appetite too.
The US market remains worried about the soybean export task because of China’s absence from the US market. We think that worry is overstated. World oilseed supply is such that lost sales to China can be made up elsewhere. And not least because China is buying so many soybeans from South America that prices there are relatively high. In time, that is going to divert other buyers to US soybeans. This ‘siloing’ of the oilseed demand is not without cost. Carry periods are likely extended. The extra carry issue, however, is minor relative to missing exports.
The news on US exports is okay. New-crop US export sales are modest but have come in above expectations of late. Moreover, strongish US old-crop export sales help in a couple of ways. One, those sales provide some evidence that high South American prices are diverting demand to the US. And, two, extra old-crop exports make some room in the supply chain.
China imposing tariffs on Canada’s canola had a swift payback for Australian canola. A Chinese importer reportedly bought a cargo of Australian GM canola last week. The purchase suggests confidence that there will be no wrinkles to Australia’s canola regaining access to China. Further sales are possible, but we would expect they will only become prevalent from new-crop canola. China’s tariffs also have a downside. Canada likely exports a similar amount of canola but does so after longer carry periods. And that canola will compete with Australia’s canola in non-China markets.
The other event last week was some clarification on US biodiesel policy. The announcements concerned how exemptions to mandates would be treated for small US fuel refineries. While the mechanics are arcane, the impact might have reduced biofuel demand for US soyoil. Last week’s clarification made this a lot less likely, even though not all issues have been resolved. The changes effectively removed a risk to US domestic oilseed demand.
In summary, the oilseed SnD picture has become a little more price-friendly. The Trade Wars are creating issues. But, given oilseed supply is not excessive, the impact will largely be diversion, not lost exports. Increased carry periods, though, are a cost. The proof of the diversion thesis is only just starting to accumulate.
Markets
Soybean position data became more mixed last week. Investor activity was less clearly about reducing long oil share trades. Investors, however, did make hefty cuts to short positions in beans and meal. Only the meal short is now extreme, but the soybean position likely remains large. Perhaps the surprise of the week was some investors selling oil futures. The position is modest. And we wonder if it survived the sharp gains in oil prices last week.
The View
Oilseed prices gained last week and remain somewhat higher than grain prices. Perhaps we have seen oilseed price lows for now. We see limited upside for prices, though, given a neutral supply context. The price outlook will continue to be complicated by policy and the resulting geographic ‘siloing’. US soybeans gained last week because of biofuel policy changes. That is unlikely to be repeated, but there is residual support because investors likely still need to reduce short positions. That upside, though, is limited by the need for US soybeans to remain competitive in non-China markets.
Soybean price gains only partially flowed through to canola prices. November ’25 soybeans gained by ~10US$/mt while November ’25 canola gained ~4US$/mt. Canola’s modest gain reflected that the soybean gains were mostly about US-specific policy. Canola’s premium to soybeans has stabilised now at about 90US$/mt. That premium is still high by historical standards, even though it fell by 30-40US$ because of China’s tariffs. We suspect that the premium can recover if the market sees evidence that Canada’s canola is successfully diverted to other destinations. However, Canada’s canola premium gains from diversion are likely mirrored in premium losses for other exporters, like Australia.
