Global uncertainty weighs on grain markets

By Doug Tenney

Every growing season reminds us that uncertainty is part of agriculture. We can watch the weather, monitor crop conditions and study supply and demand, yet events halfway around the world can still change grain prices overnight. That was certainly the case during the last week of July, when geopolitical developments, rather than weather, became the driving force behind the markets.

Grain prices collapsed sharply on Monday, July 27, as traders reacted to renewed optimism that a ceasefire in the conflict involving the United States and Iran could reduce military activity. Selling accelerated throughout the day as traders rushed to exit long positions. The phrase heard repeatedly on trading floors was simply, “Get me out.”

December 2026 CBOT corn closed at $4.74, down 13.5 cents. July 2027 CBOT wheat settled at $6.985, down 18 cents. November 2026 soybeans posted the largest decline, closing at $12.1375, down 39.75 cents.

Soybean open interest that day fell 29,693 contracts while corn open interest dropped 14,035 contracts. When prices are declining sharply and open interest drops, it indicates traders lack confidence in price activity as they exit and/or reduce their long or purchased positions.  

Additional uncertainty emerged during the final week of July when grain truck deliveries into three Black Sea export facilities became restricted because of the ongoing conflict between Russia and Ukraine. Missile and drone attacks continue to target key infrastructure on both sides. During the second half of July, Ukraine struck several Russian crude oil refineries, affecting fuel supplies for Russia’s military. At the same time, grain export facilities in both countries have sustained significant damage.

The result has been sharply higher freight and insurance costs, causing some ship owners to delay vessel availability. As a result, questions remain about Russian wheat exports over the next one to three months.

Russia has advanced significantly since its surprise purchases of U.S. grain in the early 1970s. Russia is no longer begging to buy grain from the United States or other exporting nations. Rather, in an unprecedented fashion decades later, Russia is now the world’s largest exporter of wheat.

The Strait of Hormuz continues to see its huge decline in vessel activity remain a constant concern for crude oil availability to end users around the globe, with only one to three vessels exiting that body of water to move elsewhere in the world. Renewed hostilities between the United States and Iran just days after a ceasefire on July 27, which held promise for a few short hours, prove extremely troublesome. It casts doubt on a peace agreement and the reopening of the Strait anytime soon. Some have even suggested this conflict could easily last into the U.S. midterm elections in early November.

Attention also turned to the Federal Reserve as it concluded its two-day meeting on July 29. For much of the year, markets expected at least one interest rate cut during 2026. More recently, however, stronger inflation data and changing expectations in the futures markets prompted speculation that the Fed might instead consider raising rates. In the end, policymakers left interest rates unchanged.

The weekly U.S. energy report of July 29 revealed that crude oil stocks were down 7.2 million barrels vs. the previous week. The decline was larger than anticipated, with 3.8 million barrels removed from the Strategic Petroleum Reserve. U.S. refinery runtimes reached 97.2% of capacity, up 1.1% from the previous week. U.S. crude oil stocks are the lowest since September 2018. Look for further declines in the weeks ahead.

If the U.S. soybean yield drops below 53 bushels per acre, it points to a potential line in the sand. Will U.S. soybean ending stocks still be adequate even when shipping those 25 million tons of soybeans that China agreed to buy from the United States in the coming year?

Thought for the day: “Be fearful when others are greedy and greedy when others are fearful.” — Warren Buffett.