Ag Market Surge: What's Driving the Buying in Corn, Wheat, and Soybeans to Multi-Year Highs?

In today's interview with Michelle Rook on Markets Now, we discussed recent counter-seasonal rallies and volatility across agricultural markets, focusing on technical fund buying, WASDE report impacts, and geopolitical factors driving corn and soybean prices. We also explored broader market influences across cattle, cotton, and energy, discussing how commercial carry, export demand projections, persistent inflation, and domestic agricultural policy are shaping trade dynamics. Watch the interview below:

Michelle Rook: Welcome to Markets Now. I'm Michelle Rook with Darin Newsom, Senior Market Analyst for Barchart. On a Thursday morning, we're seeing the grains finally taking a little bit of a break, with the livestock futures higher, except for the hogs. Cotton is making new contract highs again here.

All right, Darin, let's talk about the grain trade. We had a huge update yesterday: new contract highs in corn, wheat, and soybeans. We also saw some multi-year, three-year highs in wheat and corn. A little setback today. Do we expect that with end of month coming up here, some profit-taking?

Darin Newsom: Yes, I think it certainly could be, Michelle. There's a lot going on. To me, this comes down to funds, algorithms, this sort of thing, because the fundamentals of the market really aren't changing all that much day to day. If we look at what we've seen so far this week, and let's just look at December corn as an example, by my count, the December contract itself had a trade volume of over 500,000 contracts on Monday, followed it up with nearly 400,000 on Tuesday, and then another 400,000-plus on Wednesday. Just absolutely huge numbers for corn for this time of year as we head into harvest.

These aren't sell orders. This isn't commercial hedging going on. This has basically been unchecked fund buying in the market. As you said, it's pushed it to multi-year highs, two- to three-year highs. At some point, with some of these technical statistics, like momentum and volatility and everything starting to lean, getting a little bit heavy in here, it certainly looks like it could start to lead to a round of liquidation. That's the risk in this market, is when you go straight up, it doesn't leave much underneath. You've burned up most of the buy orders. If we start to see that liquidation, and we're a long way, not only from today's close, but the weekly close and the monthly close, but it would not be surprising to see some liquidation here just on these technical statistics.

Michelle: You bring up a good point because the close is more important than the open, and the funds have been eager to buy here on the breaks. Is it just fund buying? Do you not think there's any end-user buying that's happening as well, or not?

Darin: I don't know why. I can't picture, and the market certainly isn't indicating to me that there's a lot of end-user buying coming in here. We continue to see a pretty solid carry in the Dec-March future spread. It tells us the commercial side's remained relatively comfortable with the supplies that will be available as harvest gets rolling. Particularly with coming out of this marketing year, the Sep-Dec future spread is covering something like 73%, 74% calculated full commercial carry. It's bearish, telling us that there's going to be ample supplies left over rolled ahead into the new crop.

It's later on that things start to get tightened. What we see now is some possible end-user buying out in that March or May timeframe, with that May-July spread getting close to going to par, possibly going to inverse. Maybe not by the end of this month, but possibly by the end of September. That would make things much more interesting.

Michelle: The other possibility is that we are seeing a little farmer selling up here at these contract highs. Actually, we hope that's the case, don't we, Darin?

Darin: Yes, it's been a conversation I've had with a number of producers. How do you sell this up here when volatility is this high and so on? Some have had a good idea of running some trailing stops. You've got to give it a lot of room.

Again, if we just look at the markets from where it is, as Dec corn rallied past 5.30, approached 5.40 and so on, prices that, again, we haven't seen in two or three years. Getting a little bit on the books certainly isn't going to be a bad thing. The thing that we have to be concerned about is once harvest starts, particularly in areas where, say, corn crop still looks pretty good. I've heard from different parts of, say, central Nebraska or something like this, where the corn crop looks like it's going to be fine. We would expect basis to continue to weaken. If you could just make some cash sales, get some cash sales on the books that lock in both price and basis, you'd probably be looking pretty good once harvest gets going.

Michelle: One of the reasons that we do have this volatility isn't just the perception that maybe the crop is getting smaller, but we're also putting in some geopolitical and war premium here. Putin yesterday sounded like maybe nuclear war was a possibility. Boy, that got everybody on edge here. That's part of what's been going on, isn't it?

Darin: Oh, probably. It doesn't take much to move algorithms. What's the reality? We've been dealing with this for over four and a half years, and we've heard the threats before. We've seen the threats before, and we've seen the headlines and all of this sort of thing. Yes, algorithms move to the beat of these things.

Again, what's the reality? I know nobody's actually interested in reality, but what's the reality of supply and demand? We look at the soft at winter market, and its reality is it's fundamentally bearish. It has been fundamentally bearish. It simply hasn't changed.

Headlines are what they are, and stories are what they are, and that's what gets talked about. Presumably, that is what drives market buyer.

Michelle: Like I said, though, the perception is that the crop is getting smaller, and that started, at least on the corn, after the August 12 WASDE, didn't it?

Darin: Yes. Everyone knows me. Everyone knows my opinion of these things, but there's no denying that the rally that we've seen in corn this month started on August 12th. We posted a low on August 11th. It was relatively quiet up until about eleven o'clock Central time, twelve o'clock Eastern time, when the report was released. December corn has done nothing but go up since. It's obvious what the connection is.

When USDA lowers its numbers, right or wrong, doesn't matter. It doesn't matter what yield is, production, but when they lower the numbers, and the algorithms see that X is below Y and Y was what was expected, they're going to buy. It triggers the buy. Doesn't matter if it's logical. Doesn't matter if it makes sense. That is what's going to happen, and that is what happened.

As I said, we've seen incredible trade volume. We've seen a growth in open interest. Yes, this is what happens when algorithms kick in. Why did they kick in? WASDE.

Michelle: It's pretty odd or rare, I should say, to have this kind of a rally in August, isn't it? This is totally counter-seasonal.

Darin: To a certain degree. Now, the seasonal patterns have changed for December corn, and it's something that I've noticed over time. You're right. It used to be, in the old days, December corn would move lower September into October and so on. Then it got pushed back to once we hit August; it started to flatten out. That was usually because there was so much pressure over the rest of the summer, starting in June, July, and so on, that we would see the market really fall during that timeframe.

Then we would flatten that into August. Sometimes we would post our low in late August, early September, and then slowly start to move higher. This year, it was a straight V bottom on the charts, weekly, monthly, whatever we want to look at. It's just done nothing but go up. It's a bit counter-seasonal, and counter-seasonal means fundamentals have changed.

Michelle: For sure. We should also give demand a little bit of credit here. Corn exports still have been very strong. We might pick up some because of the EU drought. You do have strong exports on soybeans. This morning, new crop, 91 million bushels, heck.

Darin: Yes, and that's something. I think that's really the story. Corn exports, they peaked as far as the pace projection peaked last November. It's been coming down and flattening out ever since. The real story is the new crop, soybeans. Why is that? Is it because the US is such a good deal? No. It's because there's concern over Brazil's 2027 crop. Again, we can see this in the March-May and May-July spreads. Markets are not concerned about US harvest. If we look at the Nov-Jan spread, Nov-March, we can see commercials are relatively comfortable with what US production is going to be. It's when we get further out in that timeframe when Brazil's new supplies take over the export picture. Now all of a sudden that may not be the case. Demand may stay stronger in the US for US soybeans longer.

Michelle: You think that's why China isn't buying. It's not all politically motivated.

Darin: No, it's not politically motivated at all. The trade war is still in place. That hasn't changed. It's not going to change. We know certain people are going to say certain things that blow things up. That's just nothing has changed. I just don't think people understand that they hear all these headlines and everything, and then if you actually look at the situation, if you look at what's being said, it's always a maybe or it could be or this or that. There's nothing concrete. There is no deal. There are no deals. The situation is the same as what it was when this whole thing started in January 2018.

Michelle: Are the funds also concerned about inflation, do you think? Is that why they've been in here buying and might buy on this dip too?

Darin: I think so. I think there's a certain part of that. We know inflation is real. We know it's still a problem. We have seen, if we look at the Fed Fund futures forward curve, the idea of a rate hike has now been pushed back to after the midterm election, shockingly enough. Now it's showing that it's probably going to be December when we see the next rate hike. Initially it was supposed to be in September, then possibly October. There's no FOMC meeting in November, and now it looks like it could be December.

Now that's going to continue to change. We have seen energies sector come down. We've seen the grains sector go up. Again, a lot of this has to do with just the change in flow of money from one sector to the next. US dollar really hasn't moved all that much. That's simply because, yes, we are dealing with inflation and we are seeing some commodities react to this. The bigger part of it is that the rest of the world, for obvious reasons, is selling the US rather than buying.

Michelle: Is cotton one of those that you think is reacting to inflation here up at contract highs now?

Darin: It could be. That could certainly be. I was asked that question if cotton is still an economic indicator market. I hadn't given that much thought here over the last decade or so, but it certainly could be. We also have to keep in mind that the weather hasn't been too good over some key growing areas, particularly in Texas, Eastern Texas, and across the Southeastern growing area; the weather's been a little bit rough. It certainly could be lending some commercial support outside of also renewed non-commercial buying.

Michelle: Probably putting a little weather premium in there for sure, but we're over $0.90. That's good to see. Finally, cattle market got pummeled here by Trump administration announcing they're going to bring in imports, the border reopening, but we're up this morning. Do you think we're trying to bottom?

Darin: I think it could be trying to bottom. Again, yes, the US president's trying to crush the US cattle and beef market similar to what it did to soybeans way back when, what it's done to corn and ethanol, and all of these other US ag markets. Cattle and beef is just the latest, but the reality again is the fundamentals didn't change. We didn't all of a sudden create new domestic supplies. That hasn't happened, and that's one of the reasons why all this talk of reopening the border, importing hamburger, and all these other things is to crush the market ahead of US midterm elections. It's very important that the cattle and beef market crashes and prices stay low because then that makes the administration look better, at least in terms of possible voters.

Michelle: For sure. All right. Thanks so much, Darin Newsom, Senior Market Analyst with Barchart and Markets Now.