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There was no decoupling the grain markets from crude prices Wednesday. Oil futures plunged, dragging down corn, wheat, soybeans and soybean oil, after reports that the U.S. and Iran are negotiating a one-page memorandum that would set the stage for an eventual opening of the Strait of Hormuz. Talks would potentially begin next week in Islamabad, reports said.
June West Texas Intermediate crude, the U.S. benchmark, fell $6.84 to $91.23 a barrel on Nymex, while global benchmark July Brent dropped $8.60 to $101.27 a barrel on ICE Futures Europe. July corn dropped 11 ½ cents, July beans shed 16 ¾ cents and July wheat fell 10 ½ cents. The surge in crude prices since the war has largely been seen as a positive for grain futures, benefiting in part from expectations for increased inflation as well as increased demand for biofuels (see palm oil item below).
The potential deal comes as the national average gasoline price hit $4.54 a gallon on Wednesday, according to AAA, a rise of nearly 30 cents in a week and up from $3.16 a gallon a year ago. Diesel hit $5.67 a gallon, up over 20 cents from a week ago and more than $2 above its average price a year ago at $3.54 a gallon.
The drop in crude oil prices, meanwhile, allowed stocks to extend a rally driven largely by a rebound in tech shares. The S&P 500 rose 1.5% Wednesday, while the Nasdaq Composite gained 2%, with both ending at records. The Dow Jones Industrial Average climbed 1.5%.
Still, even if a peace deal does prove to be close at hand, much damage has been done, noted economist David Rosenberg of Rosenberg Research. He writes:
- Global stockpiles of crude have been contracting by 6.6 million barrels per day (mbd) and only a collapse in demand of about 5 mbd prevented the oil price from shooting up to even higher highs during this crisis. In total, the oil market has lost 1 billion barrels of crude so far, and world stockpiles are now approaching their lowest level in eight years (with a razor thin 45 days’ supply of refined products, such as petrol, diesel, and jet fuel left worldwide, and inventory of jet fuel in Europe at the tightest level in six years). U.S. petrol stocks are also on course to hit their lowest level on record in summer. So, as we all cheer the overnight news headlines, there is still much economic fallout coming our way for the next several months.
Fertilizer price spike implications: The late-cycle timing of the Iran conflict means the resulting fertilizer price surge will hit producers unevenly, according to a Uniiversity of Illinois farmdoc paper published Tuesday. While most farmers pre-purchased inputs, those with unpriced nitrogen now face a distinct cost disadvantage. However, economists note that a corresponding rally in grain prices has largely offset the pain; in central Illinois, the $96-per-acre increase in expected corn revenue is currently outpacing the $23-per-acre rise in fertilizer costs. This suggests that relative profitability between corn and soybeans hasn’t shifted enough to trigger massive late-season acreage flips, though soybeans were already projected to be the more profitable play under pre-conflict conditions.
- The paper warns that nitrogen prices are unlikely to return to pre-conflict levels by the time 2027 planning begins in September.
With anhydrous ammonia and DAP both potentially eyeing the $1,000-per-ton mark, the paper suggested potential cost-saving measures:
- Lowering rates: Moving toward university-based “Maximum Return to Nitrogen” rates, as many farmers currently apply above economically optimal levels.
- Product switching: Leveraging the cost advantage of anhydrous ammonia over nitrogen solutions.
- Application timing: Shifting ammonia applications to post-plant to eliminate the need for costly nitrogen inhibitors, potentially using PACE insurance to mitigate weather-related application risks.
Brazil beef blow: Brazil’s beef exports could fall 10% in 2026 from the year before due to China’s 55% tariff on beef imports that exceed quota levels, lobby group ABIEC president Roberto Perosa said on Tuesday. According to Reuters, Perosa told journalists that the the country’s beef production aimed at China is expected to halt around June, noting domestic consumption would need to grow to cover volumes that will no longer be shipped to the Asian country.
Truckers turn to renewable fuels: Renewable fuels are gaining ground as alternatives to diesel in the trucking industry by improving environmental sustainability while minimizing changes to vehicle technology, according to Transport Topics. Renewable diesel, high-blend biodiesel and renewable natural gas are seen as more attractive options for fleet operators for multiple reasons, industry suppliers and fleet executives said during a program on clean fuels at ACT Expo 2026, the report said.
“Public policy has now started to reflect the real-world needs of balancing consumer costs, electricity reliability and availability, and equipment technology readiness,” said Adam Comora, co-CEO of Opal Fuels, a supplier of renewable natural gas.
Mistry sees more room for palm oil rally: Closely followed analyst Dorab Mistry on Wednesday said Malaysian palm oil prices are likely to rise about 12% to 5,200 ringgit ($1,316) a metric ton by mid-July, boosted as high oil prices resulting from the U.S.-Israeli war on Iran boost biodiesel demand and tighten supplies, Reuters reported.The benchmark palm oil contract on the Bursa Malaysia Derivatives Exchange fell 1.34% to 4,647 ringgit at the midday break on Wednesday, though it is up about 15% since the war began in late February.
With refined fuels like diesel and gasoline rising more sharply than crude, the spread between fossil diesel and palm biodiesel has narrowed, cutting subsidy requirements and, in some markets, making palm biodiesel the cheaper option, the report noted. “Rising energy prices prompted Indonesia to reinstate its B50 palm biodiesel programme from 1 July 2026,” Mistry said. “Biodiesel mandates are being increased in other countries like Malaysia, Thailand and others too.”
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