I joined Michelle Rook on AgWeb’s “Markets Now” earlier this week to talk about wheat (KEN26)  (ZWN26), corn (ZCN26), soybeans (ZSN26), Fed rate cut hopes and fears, and what will actually happen if President Donald Trump meets with China’s Xi Jinping in mid-May. WATCH THE VIDEO HERE. 

Soybeans, See More Profit Taking, Corn & Wheat Hold Weather Premium

Michelle: And welcome to Markets Now. I'm Michelle Bruck with Darin Newsom, Senior Market Analyst with Barchart. We’re seeing quite a bit of red over in the ag space this morning with the exception of the wheat market. Let’s start off with wheat, Darin. Thanks for being with me. The market has been, what, putting in some weather premium. Do we need to put more weather premium in that market?

Darin: Yeah, it’s an interesting point, Michelle. And so for this discussion, let’s pretend that weather still matters in what used to be weather derivative markets, particularly the three in the wheat subsector. So, you know, if that’s the case, and given what we’ve seen this spring where, you know, the winter crops never really went into a full dormancy, at least that’s what I’ve been told. And then, you know, we had a warmer winter and they started coming, you know, started growing again, then get hit by a March freeze, it grows again, gets hit by an April freeze and so on. Based on all of that and the fact that the drought readings across the plains continue to worsen, then we could say, yes, this, you know, what we’re seeing here is likely a result of building some weather premium in. And we could make that argument and we could, you know, we could sound just like everybody else in the industry, you know, who never really understood, who never really follows wheat, but that’s an easy fallback conversation to have. You know, the reality is if we look at the future spreads, you know, we’re not seeing the commercial side of the market react like we’ve got a supply and demand scare anywhere in, you know, on the horizon for both hard red winter or soft red winter. In fact, even though I know there’s an asterisk attached due to soft red winter being subject at this point to CME’s lower variable storage rate of 5 cents per bushel per month, we’ve got soft red winter future spreads covering 70 to 80% calculated full commercial carry, which is bearish, which tells us there is no supply concern in relation to demand, those are the new crop spreads. So, you know, yes, the story is we’re probably building in some weather, we’ve got some newbies coming into the new generation of speculators coming in to the wheat markets looking like it’s attractive. So when it’s down, you buy based on some imaginary government numbers and then you ride it up, but fundamentally, there really isn’t much of a scare at this point.

Michelle: And technically we have not been able to get even July HRW wheat back above the March highs. So that continues to be resistance. Is there anything that can get us above that?

Darin: Yeah, you know, it's still gonna come down to the make-believe NAS numbers. And if those, you know, weekly crop condition or whatever they are, if that can trigger enough algorithms into buying. And what’s interesting, you know, again, with looking at the technical side is that we can’t really go by, you know, the patterns and everything that we used to rely on because quite frankly, algorithms aren’t geared, aren’t written to even look at things like reversals and, you know, key patterns and these sorts of things. But, you know, as I look at the weekly chart for July Kansas City, I’m showing my age, July hard red winter, you know, two weeks ago we saw the contract go to a new four-week low. That used to be a momentum indicator that it was getting ready to go down. And then last week it went to a new four-week high indicating that it’s probably going to go up. And then, so what’s it done this week? Well, it’s gone back down. So, you know, again, a lot of these technical things that we’re looking at just simply don’t hold true. It’s more of a day-to-day thing. Each day is independent of the previous and it just depends on how much, how many buy orders or sell orders for that matter come in each and every day based on what the previous session was.

Michelle: Yeah, like you say, up and down. Okay, so the corn market I feel like has gotten a little bit of support from the rally in wheat, but effectively we’ve been up, we’re down just a little bit today, but effectively we’ve been up the last few days. Is that just because farmer selling is kind of dried up here and those farmers are in the field so you don’t have that pressure in the cash market or what?

Darin: Yeah, I think so. Because, you know, if we look at the National Corn Index, we see that it has been firming in relation to the futures market. So we know basis has been firming. Now, I say that and it’s an interesting situation in the national average basis market for corn and the fact that it has been firming. We have seen the cash market, you know, pick up a little bit as sales have slowed and demand still is out there. But if we look at the big picture and we look at the previous five-year low weekly closes and 10-year low weekly closes, you know, the market’s still running below those levels. So we know overall national average basis is weak. This tells us there’s still ample supplies to meet demand. It’s just immediate term, those supplies have slowed down. Farmers are doing other things. They’ve gone out to the field. They’re planting this crop, the 2026 crop in a hurry, seemingly. So, you know, and they’ve had decent weather so far to get that done. And so, yeah, it’s helping to support the cash market a little bit. And this does translate over. It brings a few buy orders in on the future side, but we have to remember that, I mean, funds are already holding a large, net long future position in corn. They’ve been reducing it the last couple of weeks. So, you know, this tells us that when we get these rallies and when we start testing those high ends of the sideways range, you know, it’s probably going to generate some selling for lack of, you know, without any real commercial support coming in.

Michelle: Yeah, and we’re up at the upper end of our trading range again. So probably hitting some chart resistance. Exports this morning, almost 52 million bushels. So demand is certainly been stimulated at some lower prices here, hasn’t it?

Darin: Yeah, we’ve seen solid export demand for corn, you know, the entire marketing year. You know, if we take that out, you know, the pace projection based on weekly shipments, you know, has been in a downward trend. I mean, it started off so hot this marketing year since there wasn't anything moving on the soybean side, it was all on corn. So the pace projection itself has been coming down, but still running well ahead of last year. So yes, overall export demand remains strong. But again, if we look at basis, if we look at future spread, it's nothing that the supplies available the U.S. has can't handle.

Michelle: Let’s move over to the soybean market because we did put in what looked to be a key reversal in bean oil yesterday. November soybeans, did we put in a double top? We got a quarter cent from the March highs.

Darin: Yeah, again, the old technical analysts in me could sit here and say, yeah, that’s exactly what happened. And those are important, you know, things to look at and talk about. And it’s just going to mean that we're going to see new selling in the market. But, you know, in reality, given the situation, given the change dynamics of trade today, it really doesn’t mean anything because again, the algorithms just simply don’t look at double tops and they don’t look at key reversals and they don’t look at these sorts of things. In the soybean oil market, I think this is where it all comes from. And, you know, it’s tied to diesel fuel. Diesel was up earlier today, then it dipped down a little bit. But what we’ve got is, you know, a couple of weeks ago in the CFTC report, we saw that the long futures position on the non-commercial side in bean oil had reached an all time high. And so this normally opens a door to some liquidation. Then we get, you know, so we’re down for a week and then we start rallying back. We see funds adding back to that position. And so it's probably close to testing that previous all time high, again, bringing into a possibility of some liquidation. And soybeans are just following along with that. There’s no fundamental change in the soybean market other than, you know, it’s just chasing soybean oil at this point.

Michelle: All right, let’s also talk about, you know, one, have we divorced ourselves with the exception of bean oil? Have the ag space re, I guess, divorced itself from what’s going on with the war headlines? And when does inflation risk start to be traded?

Darin: Yeah, great questions. Because again, I agree with you that really the only market in the grains sector tied to energies at this point would be bean oil. You know, we throw canola in there as well. So any of the actual oil seed markets, and then that’s going to provide support to soybeans. So, you know, loosely kind of a third party, third wheel, I should say, that would be the soybean market. Corn certainly doesn’t have anything to do. So, you know, yes, I don’t think the grain sector is really watching all of the changing headlines, but it gets caught up in it. You know, as, you know, once the headlines change, which is being manipulated and certainly for market moving reasons. So we see the headlines change and then social media posts come out. And so then the commodities come down and corn and everything else, corn, we get caught up in what’s, you know, in the undertow of what’s happening over in energies and metals and these sorts of things. Again, there’s no fundamental change and there’s no fundamental reason for any of this with, you know, tying it to the, you know, the president’s war on Iran. But, you know, it does get caught up in these moves.

Michelle: Yeah, it does. You mentioned off the top though, that the grain markets might be looked at as a hot ticket to some of these speculative traders. Inflation would be one reason, right?

Darin: Yeah, inflation would be a reason, but, you know, there’s so many causes for that inflation. There’s so many other ways of playing it. You know, we’ve seen some of the soft markets go up. We’ve seen metals continue to struggle even though we’ve got strong buying from central banks in gold. So I think grains are out there. They will be an opportunity, I think, that will be looked at with some of these new, some of these new traders in inflation.

Michelle: Yeah, what about inflation tied to higher input prices? Input premium, is that a possibility here or the fund’s too dumb to know what that is?

Darin: I like the way you put that. I don’t know that they take it into account, but the commercial side on these markets will certainly take it into account. So let’s say that because of input costs, we’re going to even plant fewer corn acres. We’re going to start to see that. If it’s a real situation, if it’s really happening, we’re going to see that in those corn, deferred corn future spreads. And if more acres are going over to soybeans at a time when there’s a serious doubt about global demand for U.S. soybeans, then I think we’re going to see the opposite trade starting to develop. We’re going to see more carry being built into the soybean spreads. And a lot of this, again, will have to do with U.S. inflation, input costs, and so on. The bottom line does, do the algorithms, do the markets in general care? If U.S. producers can’t make money, no, never have, never will. It’s just not important until it actually starts to change the supply and demand situation. And we'll first know that through basis and spreads.

Michelle: But we will likely have no change in interest rates next week just because of these inflation fears, right?

Darin: Yeah, the inflation fears probably have put any idea of a rate cut on hold for the time being. And as we look at the Fed fund futures forward curve, there’s nothing expected to happen now through the balance of 2026. And what’s interesting about that is, shortly after the U.S. president went to war on Iran, we saw the October and November futures contracts of the Fed fund futures contracts dip to a point where it was indicating a rate hike, possibly this fall. So, but that's been erased as well as, you know, the status quo settled in. Nothing’s really expected to change. We’re also going, except for the fact that we’ll have a new chair, theoretically, reportedly, after this meeting, I think Chairman Powell’s term ends in May. And so, you know, then we’ll see what direction the Fed starts to take. But right now, market itself is indicating going to be keeping an eye on inflation, going to be keeping an eye on employment. And for right now, there doesn’t look to be any change in rates ahead of us for the rest of the year.

Michelle: All right. One last quick question. If the Iran war and the tensions continue between us and the U, between Iran and the U.S., does China keep its mid-May meeting date with us?

Darin: I doubt it. I mean, it has no incentive to do that. And even if it does, nothing’s going to change. Let’s say there's a meeting. So what? There’s not anything that’s going to come from that, except for China saying, maybe we’ll put off invading Taiwan for a little while.

Michelle: Yeah. Thanks so much, Darin Newsom, Senior Market Analyst with Barchart and Markets Now.

Darin: All right, thank you.

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