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Soybean futures took it on the chin after USDA bumped up its yield and production estimates Friday, with wheat also under pressure. Corn popped higher but felt spillover pressure, though changes to the balance sheet were more supportive as the stocks-to-use ratio sinks further into rationing territory.
Meanwhile, inflation data was front and center for financial markets, carrying big implications for the path of interest rates. The August consumer price index rose 0.4%, putting the year-over-year rise at 3.4%, due in large part to surging fuel prices. Gasoline rose 3.9% in August, while the other motor fuels category, which includes automotive diesel, jumped 10.1%. Stripping out food and energy, core CPI rose 0.3% in August and was up 2.4% year over year. Economists had warned that a monthly core rise of 0.3% would likely leave the Federal Reserve little choice other than to deliver a quarter-point interest-rate hike next week.
Following the data, fed-funds futures traders priced in a roughly 86% probability of a quarter-point rate hike on Sept. 16, up from 72% on Thursday and less than 50% a month ago. They’ve also penciled in a second rate hike by December.
A jittery bond market is putting added pressure on the Fed and its chairman Kevin Warsh to act. The 30-year U.S. Treasury yield this week hit its highest since 2007 despite efforts by Treasury Secretary Scott Bessent to stem a runup in yields with buybacks. The 30-year yield (yields move opposite to Treasury prices) did pull back modestly by the end of the day Friday, while the yield on the 10-year Treasury note was down 3 basis points to 4.92%.
President Donald Trump, meanwhile, has resumed calls for the Federal Reserve to cut interest rates. Analysts say a performance by the Fed next week that fails to reinforce its inflation-fighting credentials runs the risk of accelerating the bond-market selloff, which could lead to a surge in yields.
Analysts at BofA Global Research said Friday’s bond-market action, with the yield curve flattening as long dated yields fell more than short-term yields, which are more sensitive to policy expectations, showed that investors have faith the Fed appears more committed to restoring inflation credibility after a July policy meeting raised doubts.
- “If the Fed were to refrain from hiking after today’s data, it would risk a significant selloff at the long end, potentially larger than the move following the July FOMC meeting,” they wrote. “We suspect policymakers have learned that lesson.”
Market recap: Friday offered the main event in a holiday-shortened week with the release of USDA’s September reports. USDA trimmed its average corn yield estimate and nudged its soybean yield estimate higher, affirming the direction of travel for both crops discovered by last month’s Pro Farmer Crop Tour. The report put a damper on a soybean rally that had seen November hit contract highs earlier in the week, boosted by China demand and surging crude-oil and fuel prices. Wheat futures saw some pressure this week despite continued turmoil in the Black Sea, while USDA raised its global production estimate. Live cattle futures rallied, building hopes for a near-term bottom, buoyed by tight supplies and low slaughter. Hog futures saw sideways trade on weak cash and product fundamentals.
- December corn fell 3 ½ cents to $5.30 ¼, losing 6 ½ cents on the week. Corn initially popped higher following the USDA data but got dragged down as soybeans fell sharply.
- November soybeans ended with a loss of 35 ¾ cents at $12.96 ½, leaving the contract down 13 ¼ cents on the week after hitting a contract high earlier in the session.
- December soft red winter wheat fell 16 cents to $7.25 ¼, for a weekly loss of 8 ¾ cents.
- December cotton fell 216 points to 86.06 cents, losing 27 points for the week.
- October live cattle futures rose $1.85 to $219.675, hitting a three-week high and rallying $6.725 for the week. November feeder cattle futures gained $5.40 to $328.175, scoring a four-week high for a weekly advance of $13.45.
- October lean hog futures fell $1.625 to $81.525, down 77 1/2 cents on the week.
Read our detailed analysis of USDA’s Crop Production estimates and the implications for the balance sheet in this week’s Pro Farmer newsletter.
Farm bill redux: Senate Agriculture Committee Chair John Boozman, R-Ark., plans to hold another committee vote next week on his stalled farm bill to push farmer-friendly policies forward ahead of the midterms, Politico reports. The package stalled in August due to Democratic opposition over Supplemental Nutrition Assistance Program (SNAP) cuts and the absence of recovering Sen. Mitch McConnell, R-Ky. While Boozman hopes McConnell can return to vote, he intends to proceed regardless, the report said.
Democrats are demanding a two-year delay before states must share SNAP costs. Boozman confirmed to Politico that his current proposal — a one-year delay — remains his final offer to Democrats.
Russia hits Ukraine oilseed processing site: Russia resumed strikes on Ukraine’s oilseed processing infrastructure, Reuters reports, targeting a Bunge-owned facility in Dnipro. The report said the Sept. 10 attack killed two people and injured five, though Bunge reported no employee casualties. Ukraine, before the war, was the world’s top sunflower oil exporter, and has seen four similar attacks on refiners and terminals over the past 18 months, Reuters said. Ukraine’s sunflower oil production and exports are still expected to rebound significantly in 2026-27 due to a bigger seed harvest.
Saudis shut key pipeline: Saudi Arabia shut down its vital East-West crude oil pipeline after it sustained damage from multiple drone strikes from Iraq, the Wall Street Journal reported. The 750-mile pipeline, capable of transporting up to 7 million barrels a day to the Red Sea port of Yanbu has been a crucial workaround for the kingdom’s exports following Iran’s closure of the Strait of Hormuz. The report notes that the shutdown compounds severe pressure on regional energy infrastructure. it comes after Iran-backed Houthi militants seized key positions near the Bab al-Mandeb Strait, further impeding Red Sea maritime routes.
- Brent crude rose above $104 a barrel this week, with analysts warning prices could reach $120 if disruptions persist.