Toward the end of last week, the grain markets finally showed some signs of hope heading into the long July 4 weekend. A culmination of events sparked a rally in both the corn and soybean markets on Wednesday and Thursday.
- Contract lows. The corn market was coming off fresh contract lows earlier in the week, and many believed that a seasonal bottom had been put in.
- Trade deal hopes. Optimism also surrounded President Trump’s scheduled speech in Iowa on Thursday night, which kicked off a year-long celebration of America’s 250th birthday. Some speculated he might announce a trade deal with China and/or India.
- Congressional gifts. Anticipation grew as the “One Big Beautiful Bill” moved closer to final passage, with several provisions expected to benefit farmers.
- Weather swings. As always during the heart of the growing season, going into a three-day weekend brings the potential for significant swings in weather forecasts.
For all these reasons, producers and traders alike entered the weekend feeling cautiously optimistic about the direction of grain markets. However:
- China talk dropped. Thursday night’s speech didn’t deliver the hoped-for trade announcement. While President Trump covered a range of topics—highlighting his political victories, including the passage of the Big Beautiful Bill (BBB), immigration policies related to farm workers, and a patriotic push surrounding America’s semi quincentennial—there was no mention of a trade deal.
- Grain markets drop. As a result, when trading resumed Sunday night, grain markets gapped lower.
Despite the disappointment on trade, the BBB includes several key provisions that will positively impact farmers:
- Tax Relief. The bill makes the 2017 tax cuts permanent, including a 100% bonus depreciation provision—allowing farmers to write off equipment purchases in the year of acquisition.
- Estate tax news. It also doubles the estate tax exemption (expected to reach $25 million for couples), easing succession planning for multi-generational farms.
- Farm labor reform. A new “vouching” system would allow farmers to sponsor undocumented workers, granting them legal work status. While Trump maintained a tough stance on broader immigration enforcement, this carve-out provides some much-needed labor stability for agriculture.
- Crop insurance enhancements. The BBB includes expanded premium support and possibly lower thresholds for disaster declarations and coverage triggers under the Risk Management Agency, improving the safety net for producers during volatile weather years.
Stalled trade deal trumps BBB
Despite the long-term value of the BBB, the absence of a trade deal proved to be more influential in the short term. This situation perfectly illustrates the old market adage: “Buy the rumor, sell the fact.” On Wednesday and Thursday, commodity funds were covering shorts in anticipation of a trade breakthrough. But when that didn’t materialize, they quickly reversed course Sunday night, increasing their net short positions once again.
Aside from strong export numbers, there hasn’t been much supportive news in the grain complex recently.
Focus on crop progress
With a significant portion of the corn crop approaching pollination and soybeans entering critical growth stages, a threatening weather forecast may be the only thing that can reignite a significant rally at this point. Keep an eye on two key market movers:
- A shift in the weather forecasts
- A trade deal announcement with China
Either one could quickly alter the current trajectory.
Also, be prepared to act if a pricing opportunity arises. Historically, rallies this late in the season are rarely long-lived.
Find your courage
One strategy I like to use is a “courage call”—buying an out-of-the-money call option between 5 and 10 cents. Once the market reaches the strike price of that option, it serves as a trigger to make hedges or cash sales. This way, you can commit to a sale while still retaining upside potential if prices continue to rally beyond the strike price.
If you’d like to discuss these markets further or want a customized grain marketing strategy, please don’t hesitate to reach out to myself or any AgMarket.Net consultant. We’d be happy to help you navigate these volatile times.
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