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Soybeans and corn rallied smartly after USDA provided bullish surprises, but a strong U.S. dollar may serve as a fly in the ointment. It certainly bears watching after a hotter-than-expected October consumer price index all but assured the Federal Reserve will lift interest rates by a quarter point next month – with an outside possibility of an outsize move.
October CPI saw a monthly rise of 0.4%, while the core rate, which excludes volatile food and energy, was up 0.3%. (Note: There was no year-over-year figure because last year’s government shutdown resulted in the cancellation of the October 2025 CPI report.) Both readings were 0.1 percentage point above the consensus. What’s more, Fed Gov. Chris Waller put down a marker ahead of the data, telling a London audience that a core reading of around 0.3% or higher could lead him to favor a half-point rate hike in December. The hot reading lifted Treasury yields, with the rate on the 10-year note pushing back above the 5% threshold. Shorter-dated, and more directly policy-sensitive, Treasury yields led the way higher and fueled a 0.6% rise in the ICE U.S. Dollar Index, a measure of the currency against a basket of six major rivals. The DXY, as its ticker is known, hit a 1 ½ week high and trades not far off an 18-month high scored last month. A strong dollar can be a negative for ag products and other commodities priced in dollars, making them more expensive to users of other currencies.
So what’s driving inflation? As might be expected, the October figures offered more evidence that this year’s surge in oil and fuel prices are fueling inflation across the economy. The increase in core goods prices in September suggested retailers had held off as long as possible and were now being forced to pass those price pressures along to consumers, said Thomas Simons, chief U.S. economist at Jefferies, in a note. October data was a bit more of a mixed bag, thanks to a drop in used car prices, but still reinforced the observation.
Simons offered a reality check to traders taking comfort in the recent retreat in crude and fuel prices. He wrote:
- With the benefit of hindsight, it makes sense that retailers would be cautious in raising prices to pass along the pressure from increased fuel costs. Taking food as an example, grocery stores know that their consumers are squeezed by energy prices as well. So despite selling a low-margin product that is expensive to ship and store properly in a highly competitive market, they are going to wait until the consumer wallet sees some relief from energy prices before raising their own selling prices. If this is the case, then we might just be at the beginning of the energy price pass-through.
If a stronger dollar wasn’t headache enough, the Brazilian real, which isn’t part of the DXY basket, fell to its weakest level versus the dollar since December on fading expectations that inflation pressures will push Brazil’s central bank to lift interest rates, Bloomberg reported. The real closed at 5.58 per dollar, weaker than its low following President Luiz Inacio Lula da Silva’s surprise re-election victory last month. Brazilian soybeans and corn are priced in dollars on the world market, but a weaker real means producers receive more reais when they sell. Increased farmer selling weighs on Brazilian prices and makes the country’s grain more competitive on the global market.
Market recap: USDA’s October Crop Production and WASDE reports offered up some bullish surprises. Most notably, USDA lifted its 2026-27 soybean export estimate, bringing down ending stocks despite a bump in its average yield and production estimate. Corn ending stocks also declined as USDA trimmed cut its yield and production forecast more than expected.
- January soybeans surged 39 ¾ cents to close at $12.28, with December soybean meal up $5.80 to $328.70 and December bean oil up 74 points to 62.77 cents.
- December corn rose 9 ¾ cents to end at 4.49, hitting a two-week high.
- December soft red winter wheat gained 4 ¾ cents to close at $5.92 ¾. December hard red winter wheat rose 1 ¾ cents to $6.34 ¼, while December spring wheat gained 6 ½ cents to $6.28 ¾.
- December cotton fell 9 points to 78.69 cents.
- December live cattle rose $3 to end at $219.20, while January feeders gained $2.50 to $326.675.
- December lean hogs lost $0.75 to end at $55.80.
ASA warns against state exemption requests… The American Soybean Association on Tuesday warned against requests from oil-state governors petitioning for a rollback of Renewable Fuel Standard volumes. Reuters reported that the Republican governors of Alabama and Louisiana petitioned the Environmental Protection Agency to grant partial waivers from renewable fuel blending obligations in 2027, claiming it would help lower gas prices.
In a statement, the ASA said the requests, if acted on, “would strike a major blow to domestic U.S. soybean markets and rural economies more broadly” and noted that national average costs of biofuel blends are lower than conventional petroleum fuels.
- “Like all Americans, farmers are feeling the impact of the price at the pump and having to make difficult choices to remain in business,” ASA said. “But make no mistake: undercutting the RFS by waiving compliance would result in a giveaway to refineries that are making record profits while U.S. agriculture would be left holding the bag.”
Jordan to lead House GOP… House Republicans on Tuesday chose Ohio’s Jim Jordan to serve as their leader, beating out Majority Leader Steve Scalise of Louisiana. Jordan’s victory marks a major shake-up in House Republican leadership, elevating a founding member of the hardline conservative Freedom Caucus, Axios noted, with the victory seen as a signal House Republicans are opting for a more confrontational approach as they prepare to enter the minority in the next Congress. Senate Republicans re-elected John Thune of South Dakota to remain leader when they return in the minority in the new year.
Rule would cut 6.3 million people from SNAP… The Trump administration on Tuesday proposed a rule to curb automatic SNAP eligibility for households receiving Temporary Assistance for Needy Families aid, Reuters reported. The USDA estimates the change will remove nearly 18% of recipients – about 6.3 million people – from the food stamp program. Because SNAP enrollment also confers eligibility for other programs, USDA estimates 1.8 million children could lose free school lunch access. The proposed rule says the changes would make SNAP eligibility more standardized and “preserve benefits for the truly needy,” Reuters reported. Rep. Angie Craig of Minnesota, the ranking Democrat on the House Agriculture Committee, called the rule “heartless and cruel,” saying it would “make it harder to meet basic needs and roll back efforts to streamline federal programs.” The rule is subject to a 30-day public comment period.