The days are getting shorter, at least here in the northern hemisphere, a sign harvest is closer. Despite scattered instances of soaring temperatures, corn looks like it’s avoided outright disaster, and available metrics suggest the same could be true for soybeans.
Both markets rallied recently. Corn rose modestly at first. Soybeans showed more enthusiasm, thanks to a spate of buying from China in the wake of President Xi’s May summit with President Trump.
These fundamentals of supply and demand may not be the biggest story in the market headed into August. The elephant in the room for commodities, not to mention stocks and bonds, is inflation caused by fighting in the Middle East and Ukraine.
While truth is called the “first casualty of war,” the curtain call for conflicts typically is rising prices. War is expensive, so the U.S., like other countries, borrows heavily and pumps money into an economy already on full boil. In the 20th century alone, inflation followed both world wars, not to mention years of battles in Korea and Vietnam. Fears of an energy squeeze added to anxiety, just like it did in the 1970s, when rising interest rates from the Federal Reserve bled into the 1980s Farm Crisis.
Rate hike bets
Betters on Federal Funds Futures are putting their money on a rate hike, if not when money policy is updated July 29, at least by the following meeting Sept. 16. New Fed Chairman Kevin Warsh confronts a minefield of risk as he tries to create a consensus at the central bank. Uncertainty over not only his comments, but speeches from other Fed officials, could fuel either new buying or selling.
Despite the rallies, grain futures aren’t high enough to cover the full economic cost of growing either crop, worrying those who believe in signals from price charts. Consider these patterns hinting at tops:
- December corn futures took aim at May highs after bouncing off contract lows set at the end of June, but carry to July firmed less than 6 cents. True bullish psychology typically stimulates much more aggressive spread tightening. December must take out June highs seasonally to establish a bull market.
- November soybeans by contrast looked more friendly, gapping higher in the wake of July expiration, though still falling 30 cents shy of new objectives at $12.8675 despite reaching overbought status on momentum indicators. The spread between July 2027 and November 2026 sharply tightened 30 cents, but could not take out resistance from spring levels, suggesting the rally could be running out of steam.
Is the rally stalling?
Corn appeared at greater risk of confirming a high, which wasn’t surprising because rallies off spring lows are tied to yield expectations. Conditions from USDA Crop Progress ratings were modestly above average, with my models projecting a yield of 185.1 bushels per acre, slightly above the 183 printed in July’s World Agricultural Supply and Demand Estimates and in line with readings from the Vegetation Health Index.
Soybean projections from these sources were also close to the 53 bpa from USDA WASDE, despite recent deteriorations. Rallies by November futures on average stall out in the second half of July and could be at a make-or-break moment. Still, soybean rallies aren’t tethered to yields. Outside influence, from Wall Street to Washington, not to mention the Middle East and China, can also rev up or tamp down animal spirits.
My forecasting models put the average futures price for 2026 soybeans at $12.62, close to last week’s high, and a warning sign for sellers. December corn closed just a nickel from my projected high, another sign it may be time to fish or cut bait, red ink or not.