Middle East tensions keep energy, grain markets on edge

By Mike Zuzolo, Global Commodity Analytics

With lost energy supplies from the Middle East still largely out of the market, I believe the commodity trade is beginning to realize that energy-intensive grain supplies could become tighter as we move through the 2026/27 marketing year.

Crude oil and wheat remain my upside leaders

Crude oil and wheat remain my leaders to the upside because I believe they have the highest likelihood of seeing supply or production cutbacks this spring. That means they also carry the greatest chance of forcing demand rationing through higher prices.

July HRW wheat futures recently climbed above $6.50 per bushel, the highest level for that contract since late March 2025. In my view, that rally has been driven by two main factors:

• Ongoing energy supply disruptions tied to conflict in the Middle East
• Worsening drought in the U.S. Plains

Poor to very poor winter wheat ratings are nearly double last year’s level at 32%.

Recent International Energy Agency analysis showed the world remains short roughly 10 to 13 million barrels per day of crude oil and refined products from the greater Middle East compared to pre-conflict levels. April losses were expected to exceed March.

With Brent crude near $135 per barrel at the time of writing, I believe higher and uncertain production costs could begin limiting 2026/27 crop production potential in both hemispheres. Wheat is also gaining support from weather-related supply concerns.

My soybean and cattle hedge outlook has not changed

My outlook for establishing profitable soybean and cattle hedges has not changed, especially given the continuation of a weak soybean export demand pace as well as the new early-April record highs in live cattle.

Under normal circumstances, marketing soybeans and cattle in 2026 should not be difficult at these price levels. But this year, like last year, has been anything but normal. As a result, I believe we need to make some key assumptions with the goal of making better marketing decisions — or in my case, trying to make better recommendations.

Here are my top assumptions for these two commodities:

Soybeans

I remain 100% hedged on 2026 soybeans through a combination of cash sales and purchased puts.

My two biggest assumptions are:

1. If tensions between the United States and Iran are not settled by early May, progress on Chinese purchases of U.S. agricultural products could stall during a planned mid-May summit.
2. High energy prices may persist into summer, while crop rotation decisions could push additional soybean acreage in the United States.

Cattle

For live cattle, my third-quarter hedge recommendations are based on three assumptions:

1. The 2026 summer grilling season may be pressured by higher fuel and consumer costs.
2. Equity markets could move sideways or lower in the second half of 2026.
3. USMCA renegotiations could improve the odds of reopening the U.S.-Mexico border in coming months.

Why May matters

In my estimation, May could be one of the most important months of the year for commodity markets. An expected summit between leaders of the world’s two largest economies may have direct implications for global trade through the remainder of 2026.

Sign-up for a two-week free trial of my midday audio & afternoon blog post at www.globalcommresearch.com.

Disclaimer: There is significant risk of loss in trading futures & options on futures, and may not be suitable for all investors. Investors should consider the risks involved and evaluate their suitability based upon their financial conditions. Past performance is not indicative of future results.

Mike Zuzolo has been a licensed Series 3 broker & analyst in commodities since 1995 and is the founder of Global Commodity Analytics & Consulting LLC. A native of Preble County OH, Mike and his family have lived in NE Kansas since 2013. You can sign up for a free trial of his analysis at www.globalcommresearch.com.