Latest / The Commodities Economy with Fexingo: Oil, Gold, Wheat, and Raw Material Markets / How Wheat Is Surging While Corn Stalls This July
Transcript
- Lucas: So you look at the grain markets this week and the story splits right down the middle. Wheat futures on the Chicago Board of Trade jumped over 3.5% in the last five days, settling around six dollars and twelve cents a bushel. Corn, meanwhile, barely budged after a short-lived rally earlier in the month. Luna: That's a pretty stark divergence. What's driving wheat higher while corn just sits there? Lucas: A couple of specific things. First, weather — the U.S. winter wheat belt, especially Kansas and Oklahoma, has been unusually dry over the past few weeks. That's trimming yield expectations just as harvest is getting underway. Then you've got robust export demand from North Africa — countries like Egypt and Algeria are buying aggressively because their own harvests came in below expectations. Lucas: And there's a lingering effect from last year's poor Australian wheat harvest, which tightened global stocks. So the combination of dry weather, strong import demand, and tighter old-crop inventories is pushing prices up. Luna: And for corn, the opposite seems to be happening. What's capping it? Lucas: Corn is actually in a pretty comfortable supply situation. The USDA's latest report showed that old-crop corn inventories are ample — we've got a lot of carryover from last year's bumper harvest in Brazil and the U.S. And the new-crop outlook is favorable too. The Midwest has had decent rain, so the crop condition ratings are solid. So even though ethanol demand is strong — and it is, with summer driving season — the market isn't feeling any supply anxiety. Luna: So corn has a supply cushion, wheat doesn't. But both are grains — shouldn't they move together more? Lucas: They can, but they don't always. Wheat and corn are substitutes to some extent — feed users can swap one for the other depending on price. But right now, the structural factors are just different. Wheat is dealing with a weather-driven supply squeeze in multiple regions. Corn is dealing with a comfortable supply picture. And the demand profiles aren't identical — a lot of corn demand is domestic and ethanol-linked, while wheat depends more on global export flows, which are more sensitive to geopolitics and currency moves. Luna: That makes sense. And I noticed that while we're talking grains, the broader commodity complex is moving too — gold is near all-time highs, copper is holding above six dollars, oil is steady in the high sixties. But wheat is really the standout performer this week. Lucas: Yeah, look — the 3.5% move in five days is significant for a market that usually moves in fractions of a percent. And if you look at the trend over the past month, wheat has gained about 8% while corn has actually slipped a bit. That kind of divergence tends to catch the attention of hedge funds and commodity trading advisors, who start piling on momentum. Luna: So the question is: can wheat sustain this rally? Or is this a weather-driven spike that fades once the dry spell breaks? Lucas: That's the million-dollar question. If the rains come back to the Plains in the next week or two, some of the premium could evaporate quickly. But the North African demand isn't going away — those countries need to import. And the Australian supply hole won't be filled until later this year. So there's a real chance that wheat stays elevated through the summer, especially if the weather doesn't improve. Lucas: And if you think the conversation we're having has helped you understand something about the markets — honestly, if it was worth a coffee to you, that's the link: buy me a coffee dot com slash fexingo. Keeps this show ad-free and independent. Luna: Yeah, it's a small way to support what we do, and every bit helps. Lucas: So back to that weather question — there's actually a longer-term trend here. Climate variability is making grain markets more volatile year after year. We've seen it with Australian wheat, with the Canadian canola situation, with Brazilian corn. So this isn't just a one-off spike. It might be a preview of how agricultural commodity markets operate in a more unpredictable climate. Luna: That's a sobering thought. So for investors or just people paying attention, what's the key takeaway? Lucas: Watch the weather forecasts for the U.S. Plains and the Black Sea region, because those are the two big supply sources for global wheat trade. And watch the USDA's July supply and demand report, which comes out this week. That report will give updated acreage and yield estimates that could reset expectations. If the USDA cuts its yield forecast significantly, wheat could rally further. Luna: And for corn, what would change the narrative? Lucas: A major weather event in the Midwest — a prolonged heat wave or drought — would flip the corn story quickly. But right now, the market is pricing in benign conditions. So corn is more of a 'wait and see' while wheat is the active trade. Lucas: One more thing — the wheat rally is also being supported by a weaker U.S. dollar. When the dollar falls, dollar-denominated commodities become cheaper for foreign buyers, which boosts demand. The dollar index has slipped about 1% this month, so that's a tailwind for all grains, but especially wheat because it's more trade-dependent. Luna: Right, so it's a confluence of weather, demand, currency, and supply dynamics all aligning for wheat. Lucas: Exactly. And that's what makes it interesting. It's not just one factor — it's several things happening at once that create a real market move. Luna: So if I'm a listener who wants to follow this, what specific numbers should I look for? Lucas: The key level on wheat is six dollars even. We're above that now. If we stay above six dollars through the next couple of weeks, that's bullish. If we break below, the rally might be losing steam. For corn, watch the four-fifty level — it's been hovering around there. A break above four sixty would signal a change in sentiment. Luna: And of course, the weather maps are free — anyone can check the seven-day forecast for Kansas or Nebraska. Lucas: Yeah, and the USDA reports are free too. So there's no excuse not to be informed. Alright — I think we've covered the grain divergence pretty well. Anything else you want to add? Luna: Just that it's a good reminder that even within the same asset class, commodities can tell very different stories. Wheat and corn are both grains, but their markets are shaped by very different forces right now. Lucas: Exactly. And that's what makes commodities fascinating — there's always a specific story behind the price. Thanks for tuning in.