Latest / The Commodities Economy with Fexingo: Oil, Gold, Wheat, and Raw Material Markets / How Wheat Is Surging While Natural Gas Crashes in July 2026
Transcript
- Lucas: Alright, so wheat is surging and natural gas is getting absolutely crushed. And I think that pair — those two markets moving in completely opposite directions — tells us a lot about where the economy actually is right now. Luna: Yeah, the numbers are pretty stark. Wheat futures up five and a half percent in the last five days, over six thirty-nine a bushel. Meanwhile natural gas down more than nine percent, under three dollars. Lucas: Right, and you don't often see that kind of divergence between a major food commodity and a major energy commodity unless there's something specific driving each one. So let's dig into what's behind the wheat rally first. Luna: Heat wave in Europe, right? I've been seeing reports that France and Germany are in the middle of their worst July heat in years. Lucas: Exactly. The European wheat belt is getting cooked. France is the EU's biggest wheat producer, and they've had temperatures above thirty-five Celsius for over a week now during the critical grain-fill period. That's a yield-killer. Analysts are already cutting their production forecasts for this year's harvest. Luna: And it's not just Europe. I saw that parts of the U.S. Plains are also drying out again. The hard red winter wheat crop in Kansas is smaller than expected. Lucas: That's the thing — you've got supply concerns on multiple continents at once. And then on top of that, Russia has been talking about export restrictions again. They've been floating the idea of a minimum export price or even a quota if domestic prices keep rising. Luna: That would be huge. Russia is the world's largest wheat exporter. If they start capping exports, the global market gets tight fast. Lucas: Exactly. So the wheat story is fundamentally a supply-side shock. Now flip to natural gas. Why is it collapsing while wheat is rallying? Luna: Well, the weather story cuts the other way for gas. It's been a mild summer in the U.S. so far. Less air conditioning demand means less natural gas burned for power. Lucas: That's part of it. But the bigger factor is storage. U.S. natural gas inventories are well above the five-year average for this time of year. We entered the injection season with a lot of gas left over from a relatively mild winter, and then we've had a cool spring and early summer. Luna: So the market is looking at a big glut and saying, we don't need this gas anytime soon. Lucas: Right. And on top of that, U.S. LNG exports have been running a bit below capacity because of maintenance at some terminals. So the normal outlet for surplus gas is partially blocked. Luna: So wheat is about a supply crunch, gas is about a supply glut. Opposite stories, same weather theme. Lucas: Exactly. And I think this divergence also tells us something about the broader economic picture. If you look at inflation expectations, the ten-year breakeven rate has ticked down to two point two three percent. That's down from two point two five a few days ago. Luna: So the bond market is saying inflation is cooling, which is good for the Fed. But then you have wheat spiking, which is a food inflation risk. Lucas: Yeah, and that's the tension. Core inflation measures exclude food and energy, but consumers feel it at the grocery store. The CPI data from May showed headline inflation still running hot — all items CPI at three thirty-four, up from three thirty-two point four one the month before. Luna: So even if core is cooling, food prices could keep upward pressure on overall inflation. That makes the Fed's job trickier. Lucas: Speaking of tricky — you've also got the U.S.-Iran situation flaring up again. The headlines this week said hostilities resumed, and that's normally a bullish factor for oil and gas. But natural gas isn't budging. That tells you how powerful the storage glut narrative is. Luna: Yeah, I noticed oil is actually up — WTI crude up four and a half percent in five days, Brent up five point seven. So energy markets are splitting between crude and gas. Lucas: That's a really good point. Crude is rallying on geopolitical risk and OPEC+ discipline. Natural gas is just ignoring all of that because the fundamentals are so bearish. Luna: So if you're a commodity trader, you've got to be really specific about which market you're in right now. You can't just say 'energy is up'. Lucas: No, you can't. And that's what I love about this moment in commodities — the granularity matters. Wheat is a weather and politics play. Gas is a storage and weather play. They're both weather-linked but the outcomes are totally different. Luna: And corn and soybeans — they're up too, but not as much as wheat. Corn up four point four percent, soybeans barely up half a percent. So within grains you've got leadership from wheat. Lucas: Right. Corn has its own story. U.S. corn acreage was down this year, and there have been some dryness concerns in the western Corn Belt. But wheat is the leader because of that acute European heat wave. Luna: One thing I'm watching is whether the wheat rally starts to spill over into other grains. If wheat gets too expensive, buyers might switch to corn or feed wheat alternatives. Lucas: That substitution effect is real, but it takes time. Right now the market is focused on near-term supply. The next USDA WASDE report is due next week — that's going to give us updated global supply and demand numbers. If they cut EU wheat production estimates significantly, we could see another leg up. Luna: So the heat wave isn't over, the report isn't out yet, and the geopolitical situation is fluid. I feel like wheat has more room to run. Lucas: I think so too. But let's not ignore the fact that natural gas at under three dollars is historically cheap. Some analysts are already saying that if we get a late-summer heat wave, or if LNG exports ramp back up, prices could snap back quickly. Luna: Yeah, commodity markets can turn on a dime. That's why we keep coming back to them. Lucas: You know, that's actually a good segue. We do this show every day, no ads, no sponsors, just our take on what's moving. And if walking through the economy with us has made something click — maybe you finally understand why wheat and gas can go in opposite directions — then we'd love for you to support that mission. Luna: Yeah, we keep it ad-free on purpose. It's just cleaner. If you appreciate that, the link is buy me a coffee dot com slash fexingo. No pressure, seriously. Just helps us keep doing what we're doing. Lucas: Alright, back to the markets. Next week we get the CPI report for June, plus the start of earnings season. Both of those will feed into the commodity narrative. If inflation comes in hot again, that could put pressure on the Fed and support gold. If it's cool, that might boost industrial commodities like copper. Luna: Copper is actually up one point seven percent in the last five days. So it's starting to find a bid again. Lucas: Yeah, copper at six twenty-eight is still well off its highs from earlier this year, but it's stabilizing. And that's consistent with a soft landing narrative — economic growth slowing but not collapsing. Luna: So the commodity complex right now is really a story of divergence: wheat up, gas down, copper steady, gold flat to slightly down, oil up. There's no unified theme. Lucas: No, there isn't. And that's actually a healthy sign. It means markets are pricing individual fundamentals rather than just macro risk-on risk-off. That's when active commodity investors can add value. Luna: Alright, so for listeners: keep an eye on European weather, the USDA report, and the CPI print. Those three will shape the next move in wheat and maybe even gas. Lucas: And we'll be back tomorrow to break it all down. Thanks for listening.