Rallies across grains and the soy complex picked up steam this week as traders build risk premiums in response to a Middle East conflict with no immediate end in sight. Growing concerns over potential production curbs due to elevated fertilizer and fuel costs enhanced each day the Strait of Hormuz remains closed.
Wheat futures have seen the most profound impact, though HRW wheat futures have taken the lead as dry conditions have persistently plagued key U.S. growing areas along with recent frosts.
July HRW futures remain $1.66 3/4 above the mid-October low, while SRW futures are up around $1.12 since the early January low, after both pulled back from nearly two-year highs at midweek. This has ultimately driven a divergence between the two classes of wheat, with the HRW futures edging to a nearly 57-cent premium to SRW futures, a notable advance from a 6-cent discount in late February.
Meanwhile, corn futures have notched a similar path, with December futures wiping out the March 9 high this week to mark a 53 1/2-cent gain from the mid-January low.
The soy complex has held steady in recent weeks, with soybean futures taking direction from soyoil futures, which have consistently pushed to fresh multi-year highs amid expectations of strong biofuel demand, in both the U.S. and globally.
However, spreaders have also been active, with meal facing strong gains as traders liquidate soyoil longs and step up meal purchases. The collective net long across soybeans and its derivatives remains robust, leaving some uneasiness around a potential liquidation event, though fund managers could certainly stay the course given current demand for biofuels and feedstocks.
What to watch
Funds are a key indicator of price direction, though CFTC’s Commitment of Traders Report, which includes data through the Tuesday of each week, isn’t released until Friday at 2:30 CT. While delayed, the data aids in recognizing commercial versus speculator positioning that can influence spreads.
Currently fund managers hold a net long of 264,103 after buying nearly 80,000 futures and options contracts through the week ended April 28 - solid indicator of near-term bullishness. Meanwhile, fund managers liquidated 7,602 soybean contracts over that period to hold a net long of 185,282 contracts. Funds continue to hold a notable bullish position across the soy complex, totaling 472,196 futures and options contracts at the end of April. Wheat futures have experienced a dramatic unwinding of shorts, since early January, with fund managers holding a reported net long of 10,664 contracts - that was a more than 21,000 jump to the good from the previous week.
Heightened global production concerns driven by weather and implications of lingering geopolitical concerns could lend to continued fund buying, while low U.S. wheat acres and likely production curbs may keep hedge pressure from standing in the way of an extended rally.
While corn gains have been impressive of late as fund managers increase net long positions, U.S. farmers will continue to bring to market the massive 2025 crop, which could dent rallying prospects. However, export and ethanol demand continue to prop up basis across the country, most notably in the eastern Corn Belt. Look for basis to remain steady over the next couple of months, with potential for a seasonal increase during the summer months.
Old-crop soybean futures have held a steady, consolidative tone since mid-March, which typically indicates a larger move is on the horizon. A strong technical posture affords a level of comfort for both old- and new-crop futures, though a profit-taking pullback next week could prove healthy for new crop soybeans after a reach to new highs. Like corn basis, soybean bids in the eastern Corn Belt are notably firmer than those in the west, though that’s not terribly uncommon given river logistics. Meanwhile, keep an eye on what transpires with China and U.S. acreage, both of which will certainly be drivers of new-crop basis.
Looking ahead
While recent fund action and resulting price movement across grain and soy futures enlivens prospects of steady to higher prices as the growing season progresses, it’s imperative to remain disciplined in all marketing efforts. We have recently advised purchasing put options to provide net floors as elevated uncertainty may be the new normal.
Fertilizer and input prices will undoubtedly affect 2026 acreage and production, though there’s potential of an even greater effect in 2027. The stakes are high, and observation, action and maintaining a high level of consistency will certainly be key components to operational longevity.