Latest / The Commodities Economy with Fexingo: Oil, Gold, Wheat, and Raw Material Markets / Why Corn and Wheat Are Rising While Soybeans Fall
Transcript
- Lucas: Let's start with a picture you don't see every day in the grain markets: corn and wheat are both up this week, corn by nearly five percent, wheat by more than three, but soybeans are down over one percent. That's a pretty sharp divergence. Luna: Especially since these three crops often move together on broad macro factors. What's pulling them apart? Lucas: A couple of distinct stories. Wheat's rally is tied directly to geopolitics. The U.S. strike on Iran yesterday after that surprise missile attack has reignited the risk premium across all Middle East-sensitive commodities, but wheat specifically because of the Black Sea. Even though Iran isn't a big wheat exporter, the escalation raises the specter of shipping disruptions in the broader region and adds uncertainty for Ukrainian and Russian exports. Luna: Right, those two countries account for roughly a third of global wheat trade. So any hint of instability in the Black Sea corridor bumps prices. Lucas: Exactly. Corn, on the other hand, is more about domestic demand. The USDA's latest export sales report showed strong Chinese buying of U.S. corn, and there's also the ethanol mandate kicker — with gasoline prices elevated, ethanol blending stays profitable, which supports corn grind. Luna: And soybeans? What's dragging them down? China is also a huge soybean buyer. Lucas: China is, but they've been canceling some soybean purchases lately. The bigger story is Brazil's record harvest. Brazilian soybean production came in at over one hundred and sixty million metric tons this season, flooding the global market. U.S. soybeans have to compete with that cheap supply, and right now they're losing. Luna: So it's a classic supply glut story for soybeans, while corn and wheat each have their own tailwinds. But I'm wondering: given that the latest CPI reading came in lower again, and core CPI is also cooling, shouldn't that pull down all grains? Lower inflation usually means lower commodity prices. Lucas: You'd think so, but look at the ten-year breakeven inflation rate — it actually ticked up to two point two six percent from two point two zero. So the market is pricing in higher future inflation, even as current CPI falls. That divergence is partly due to the Iran oil shock feeding into cost expectations. And grains are also being lifted by that broader reflation trade. Luna: Interesting. So the bond market is saying 'higher inflation ahead' while the CPI data says 'cooling'. And grains are caught in between, but the specific supply/demand dynamics are winning out for each crop. Lucas: Exactly. For corn, you've also got support from the fact that U.S. crop conditions slipped slightly in the latest USDA report. Good, but not great. And weather forecasts for the next two weeks show above-normal heat in parts of the corn belt, which could dent yields just as the crop goes into pollination. Luna: That's a key stage. Pollination stress can directly reduce kernel count. And for wheat, I imagine the heat is less of a factor since winter wheat harvest is mostly done in the southern plains. Lucas: Right. Spring wheat is still growing in the northern plains, but the risk premium from Iran is overpowering any weather concerns there. The key number to watch is wheat settling at six eighty-one fifty per bushel — that's up eleven percent in the last month. Corn at four seventy-three is up eight percent. Meanwhile soybeans at eleven ninety-four are basically flat over the month. Luna: So if you're trading grains, you really have to know which story you're playing. It's not a blanket agricultural trade right now. Lucas: Not at all. And that's what makes episodes like this useful — understanding the nuance behind the price moves. If you find that kind of breakdown helpful, this whole show stays ad-free because of listener support. If you want to help keep it going, you can head to buy me a coffee dot com slash fexingo. It's a simple way to say this kind of analysis matters. Luna: Yeah, it really does. And it keeps us independent, so we can dig into whatever angle we think is most interesting without any sponsor influence. Lucas: Alright, back to the grains. The biggest factor to watch in the next week is the USDA's August crop report, which will give the first field-survey-based yield estimates. If corn yields come in softer than trend, that could send corn above five dollars. And for soybeans, keep an eye on Chinese buying — if they start booking more U.S. cargoes, that floor could firm up. Luna: And for wheat, it's all about what happens in the Strait of Hormuz and whether the Black Sea corridor stays open. That's a moving target. Lucas: It is. But for now, the message is clear: grains are not a monolith. Corn and wheat have tailwinds that soybeans don't. And understanding the why behind that is what separates a smart commodity view from a lucky guess.