MARKETS:
Monday Check-in
Inter-crop markets likely mean rangebound prices. Corn, soybeans are near the highs. Wheat is defining lows.
Summary
- Grain and oilseed markets are rangebound for now.
- We are entering a period of the year between major crop risks.
- Northern summer crop risks are receding rapidly.
- Southern winter crops do not have threats at a scale that can nudge SnDs from the neutral zone.
- Until we get to a phase where southern summer or northern winter crops are at risk, markets will lack the impetus to drive big price moves.
- That point is at least a fortnight away.
- Global wheat prices look to be setting season lows.
- The corn price rally will likely soon run out of steam as supportive factors dissipate.
- So too US soybean prices.
- Oilseed pricing, though, continues to be messy.
- Canola price weakness is linked to oil prices that likely stabilise soon.
- Canada’s canola prices have a special discount of their own for now.
Macro
FX: The US Dollar had a mixed week, consistent with the wider range of market views. And, also, because the financial world was reminded of why it holds so many US Dollars. Sure, the greenback has taken some reputational damage lately. However, the large-scale alternatives (i.e. not precious metals or cryptos) have issues of their own. France and the UK’s increasingly wobbly public finances worried markets over the past week or so. In that context, the greenback still stands as the least-worst option for many. For crop prices, a lack of consistent direction for the US Dollar is an irritant. Range-bound prices, and so modest volatilities, mean that currencies can be more influential on any given day.
Energy: Oil prices bounced around last week only to finish in the middle of their 2025 range. Oil futures backwardation again steepened a little, cushioning returns for some commodity investors.
Rates: The market became more confident that US short-term interest rates will decline. US$ carry costs thus would also fall, so that expectation is unchanged. Thus rates are not having much impact on the structure of commodity curves for now.
Wheat
Crop
Growers now start planting 2026 northern winter crops. The watch consists of two regions. Around the Black Sea. And US north-west. Both regions are dry now and likely remain that way for another week or so. Crop risk, for now, remains low. There remains plenty of time for moisture to accumulate and start crops. Ahead, ABARES will likely raise their Australian wheat crop estimate this week to above 33mmt (from the June estimate of 30.5mmt). The upgrade will probably not surprise many.
SnD
Season 2025 production is little changed. And, while 2026 northern winter crops are on the horizon, it is too early to form views on any exceptions. The trade flow picture, though, is evolving.
- The US is exporting wheat at a rapid pace. The pace is above season 2020, when the US exported 27mmt. The USDA’s current 2025 estimate is 25mmt. These exports are headed to Asia, including Indonesia and Vietnam. Some of that might be trade deal promises being fulfilled. And, potentially, displaces other exports given US inventories if the rapid pace continues.
- The Black Sea’s slow export flow may be coming to an end. Exports in July and August are a third lower than last season. Prices, though, have begun to weaken in Russia, possibly prompting more exports.
- US displacement and late Black Sea exports are potentially an issue for Australia’s exports. And more so, given a larger (~25mmt) export task.
Positions
SRW and HRW positioning continue to move in mysterious ways. In SRW, investors both cut their short positions and raised their long positions. And, in HRW, investors raised both their long and short positions. The changes emphasise that investors are a varied group, running very different strategies. The result was that investors still had large short positions in SRW and HRW, but the long SRW position had become large. Importantly, a large SRW long and a large SRW short mean quite different position sizes. The short position is, roughly, twice the size of the long position. Both position changes are buying futures, so they are likely an important reason why SRW prices rallied over the past week or so. Helping that was another feature of the week: the sharp falls in SRW and HRW open interest. Open interest remains high by recent standards, but much of the activity was closing positions. The price moves since Tuesday suggest SRW positioning got longer over the balance of the week.
The View
Our broad view remains that the SnD context will see wheat prices remain low and trade in a range. We still think season lows are nearby. US wheat futures managed a gain last week. And that gain means SRW December futures look more like a season low is in place. HRW December futures, though, made new lows, so their lows are not yet evident. Still, their sharp bounce at the end of last week was encouraging. The upside moves can continue 15-25US¢ purely if investors cut short positions. We do not expect any extensive rally. The right sequence of events might perhaps see SRW December regain 560US¢ briefly. The US Dollar remains a potentially important influence in a range-bound market.
A couple of known unknowns have the potential to knock the wheat market out of its range.
One is widespread dryness around the Black Sea. This issue is likely a ‘slow burn’. We remain at least several weeks away from this issue prompting any crop worries. The issue, however, can boost prices without any crop downgrades, if substantial short positions persist. The Black Sea worry threshold to getting out of short is likely well lower than getting into a long.
The Russia-Ukraine war remains the other potential catalyst for a move higher. The conflict is intensifying, so more accidents are possible. However, such accidents are low-probability, high-specificity events. And, as such, not something that can be relied upon tactically or strategically.
Coarse Grain
Crop
Coarse grain crop estimates for the northern summer are still receding a little. US corn crop estimates are being shaved by dry weather patches, disease and development kinks. Crop losses in Europe, Ukraine and Russia are being formalised but are not news. The EU confirmed yield declines in a 4% lower corn crop estimate. Overall, the start of September means that northern summer crop risks are receding. So, any losses will come to a halt with crop maturing and harvesting. Any worries about northern winter or southern summer crops are at least several weeks away.
SnD
Production forecasts continue to cause coarse grain SnDs to tighten a little. We are now passing the time when big crop revisions can be expected.
Trade flows continue to evolve. Worries about overlap between the Brazil and US corn export programs have eased. Brazil’s corn exports have accelerated sharply in August, according to ANEC’s estimates. Before August, Brazil’s corn exports from April were more than 1.5mmt behind last season. After August, they are now just over 0.25mmt behind last season. Brazil’s larger crop still means that ~2mmt extra corn will likely be available for the Oct-Mar period. That 2mmt remains an issue, but it is markedly less than feared a few weeks ago.
Positions
Corn open interest fell heavily last week. The fall was across most categories. Investors cut their short position, but it remains the dominant market feature. The market action since Tuesday suggests the position will be smaller by now.
The View
Corn prices stepped up again last week. The recoil from uber-large crop estimates continues to lift prices from their August WASDE lows. Strong US export sales provided further impetus. And investors buying back short positions also helped. We now wonder whether the fuel from those factors will begin to run low. Northern summer crop risk is receding so they are less prone to lower production estimates. Large US export sales will stop being a surprise. And the investor’s short position is finite. Brazil and the US still have a lot of corn to sell. In our view, that ultimately limits any rally. So, coarse grain prices likely have a cap that is 10-15US¢ away.
Risks to that view are either not immediate or unlikely. Worries about northern winter and southern summer crops are at least a few weeks away. The Russia-Ukraine war is also a risk coarse grain flows but are a low-probability risk.
Oilseeds
Crop
Oilseed weather issues continue to cut yields somewhat. US soybean crops are dropping yield in the northern Mississippi Delta. Also, sunflowerseed and soybean crops continue shrinking across Europe, Ukraine, and Russia. Neither issue is new, and both are now reflected in crop forecasts. Brazil is starting to plant 2026 soybeans, but meaningful assessments are at least a fortnight away.
SnD
Oilseed SnDs are tightening up little as a consequence of some soybean and sunflower losses in Europe and the US. However, because both are increasingly known knowns, their impact will decline. Canada’s official canola crop forecasts were largely as expected. Statscan’s latest forecast is for a 20mmt crop. No relief in those numbers for tariff-addled Canadian canola.
Trade flow news remains dominated by China’s soybean imports.
The US market remains worried about the local soybean export task given China’s absence. US exports elsewhere, though, are doing comparatively well. In 2018, non-China buyers of US soybeans were slow to take advantage of lower new-crop US prices. This time, US non-China soybean exports are running some 2.25mmt ahead of their 2018 levels. That quantity is not going to fill the gap, but it does show that diversion from China to elsewhere is growing.
Many continue to expect (or maybe hope) that a trade deal of some sort will, eventually, see some US soybeans travel to China. A small-scale deal is perhaps possible that will help within this season, but we are sceptical. China continues to display a determination to avoid US soybeans. China auctioned soybeans from reserves on Friday. The auction, in part, is perhaps a statement that China can get by without US soybeans. And perhaps also, in part, a gesture to keep other suppliers ‘on their toes’. The prospect of the auction put a dent in Brazilian soybean prices last week. Even so, China continues to seek soybeans from South America.
The oilseed SnD picture remains broadly neutral. Trade Wars issues, though, continue to complicate matters. That makes regional balances more influential for prices.
Positions
Another week where investors’ major positions – short beans, short meal, long oil – shrank. Of those positions, only the short meal position remains large. So, for now, the investor influence outside of meal is waning.
The View
Oilseed prices had a mixed week. Soybean prices were stable, but canola collapsed. The difference demonstrates the geographic siloing of oilseed markets.
For all the US market’s angst about missing China sales, US soybean prices have held onto their post-WASDE gains. That seems somewhat contradictory, but there were supportive factors. Some US crop shrinkage. Strong non-China US export sales. US soybeans also remain cheaper than Brazil soybeans. And investors have been buying back short positions, perhaps in part because of trade deal rumours. All of this support, however, is finite. So, we think soybean prices are rangebound and likely near the top of their range.
Soybean price stability was of little assistance to canola futures prices as they fell more than 5%. Winnipeg canola’s premium to soybeans thus fell from about 90US$/mt to about 68US$/mt. Canola suffered because oil prices fell heavily last week. US soybean oil fell more than 5%. However, Canadian canola prices also reflect uncertainty about replacing China as an export destination. Winnipeg November ’25 fell about 40A$/mt last week. Australian new-crop prices also retreated, but by a much smaller 15A$/mt. So, Australian canola prices felt the oil price part of the fall, but not the Canadian part. Thus stability for Australian canola prices likely comes when oil prices stabilise.
