With the recent government shut down, staple weekly and some monthly reports from the USDA will either be delayed, perhaps for weeks, or not released at all. With the lack of news, grain markets likely will trade in a quiet, lackluster manner. Without those government reports, what fundamental news items should you monitor? Here are three:
What’s happened
- One. Cash basis levels across the Midwest are the first, and most important, element to watch. Preliminary corn and soybean yields across the Midwest are extremely mixed and variable, with many producers suggesting an overall theme of harvest yields “less than last year.”
A surprise, since most of summer weather in the United States was viewed as ideal, and the August WASDE report pegged corn and soybean crops at jaw dropping record yields. However, prevalent disease in corn, and a hot and dry August in the eastern Midwest may have taken a toll on the crop.
Normally, cash basis levels tend to stay wide at harvest. With freshly harvested plentiful supplies coming to town, many grain processors or grain elevators do not need to “bid up” for inventory. But might that sentiment shift this fall?
Some basis levels are said to already be improving. Why might that be? It could be due to a variety of reasons.
It could be that in some areas of the country, the crop is smaller than normal and so end users may be trying to pull in as much grain as possible, while prices are low. Another theory is that with the government shut down, weekly export sales, or daily large export sales are not being broadcast, so potentially some global end users may be gobbling up cheap U.S. grain while they have the advantage of being on the “down low” for transparency. Or a final hypothesis might be that farmers are harvesting aggressively thanks to conducive harvesting weather, filling bins at home first, and might take the overage to town towards the end of harvest.
- Two.Monitor the U.S. Dollar. In January 2025, the value of the U.S. Dollar Index was trading near 110. Trending lower ever since, the U.S. dollar is now trading near 98. (insert us dollar chart here)
Some feel that the government shutdown may add downward pressure to the U.S. dollar because it increases the chance that the Federal Reserve may be compelled to cut interest rates.
But a lower U.S. dollar can help keep U.S. ag exports more competitive (due to currency exchange rates). All you need to remember is that when the value of the U.S. dollar is down, currency exchange rates make it cheaper for other countries to import our commodities. A lower dollar has a tendency to increase demand for corn, soybean and wheat exports.
- Three. Monitor the fund traders. Who are “the funds”? They are traders who represent the big investment money that trades in commodities. Fund managers watch and monitor grain market fundamentals and technical chart aspects as they look for opportunities to invest and make money.
When they are long (buyers) in the grain market, prices tend to trade higher, and underlying friendly fundamental components usually also support grain prices when they’re long, too. When funds are short (sellers) in the market, it is often due to grain supply and demand fundamentals that are shifting to bearish
The good news is we can keep an eye on their actions. Every week, the government requires the funds to disclose the number of positions they bought or sold during the week. From there, we can track whether they are amassing a long or short position in the market. Of course, with the government shut down, we are unable to see a summarized weekly report, but it is possible to look at their daily activity for clues to a potential trend.
One interesting point to note is fund trader activity against the backdrop of interest rates. When interest rates were higher recently, fund trader involvement in commodities had a muted tone. The assumption was that higher interest rates would reduce demand for commodities, and therefore less demand would likely equal more supply of commodities, keeping grain prices lower. In addition, because of higher interest rates, the funds could invest in other potentially less risky investment areas and receive a decent rate of return on those investments, which was also due to the higher interest rates.
But now the tables may be turning as the Fed has finally begun to cut interest rates, after holding them at higher levels for nearly a year. As interest rates come down, the managed money funds may retreat from their negative commodity price outlook. The next question is: Will they come sneaking back into the agricultural space as buyers in late 2025 and early 2026?
Prepare yourself
Continue to monitor harvest yields and watch basis levels to try to understand limited grain market fundamentals while the government is shut down.
The market is trying to digest multiple influences: Higher old crop supply (on paper from that quarterly stocks report), a lack of USDA data because the government is shut down, anticipated lower yields at harvest, and the possibility of funds buying back short corn positions and soybean positions.
The overly bearish price sentiment from early August is no more. New fundamental factors are bubbling up into the marketplace, which could boil into significant friendly factors for the end of 2025. Government shut down or not, cash grain markets and basis monitoring is paramount. My bullish horns are starting to come back out.
Reach Naomi Blohm at 800-334-9779, on X: @naomiblohm, and at naomi@totalfarmmarketing.com.
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