By: Editorial Team, StoneX Media
The U.S. Department of Agriculture put corn crop conditions at 57% good to excellent, down from 71% a year earlier and below the five-year average of 61%. Corn and soybean divergence took hold because that government condition data landed alongside a separate Pro Farmer Crop Tour, and the two data sets pushed the complex in opposite directions. The crop tour's corn yield estimate came in well below the U.S. Department of Agriculture's own corn yield figure, the widest divergence between the two on record, while the same tour put soybean yield above the government estimate at a level that would be a record if realized. For physical buyers, why it matters is that corn now carries two independent signals of a smaller crop while soybeans carry a bigger one, which changes how each leg of coverage is weighed.
Bertrand Oesterle is Vice President, Clearing and Execution Sales at StoneX, where he tracks a range of commodity markets and contributes to StoneX market intelligence covering grains and oilseeds, the two complexes that split apart after the crop tour.
The U.S. Department of Agriculture's crop conditions report put corn at 57% good to excellent against 71% a year ago, with the five-year average at 61%. As Oesterle puts it, "It's the first time in the season that we are below the five-year average". That government reading is a separate data set from the Pro Farmer Crop Tour, whose independent field survey produced a corn yield estimate well under the U.S. Department of Agriculture's own yield number, the largest divergence between the two on record for both output and yield. Why it matters for physical buyers is that the smaller corn crop case no longer rests on one survey, because a government condition rating and a private field tour moved the same way for different reasons. Pro Farmer historically carries a tendency to estimate low, which is the standing counterargument to its number. Consequently, the corn leg is trading a tightening story while the market waits to see whether the eventual outcome lands closer to the tour estimate or the government one.
The Pro Farmer Crop Tour put U.S. soybean yield and production above the U.S. Department of Agriculture's most recent estimates, at a yield that would be a record if realized. That bigger and better crop arrived when soybeans and soybean oil were already under pressure, because reporting suggested a decision on small refinery exemptions was due within roughly ten days. Layered on top, renewed pressure on energy markets fed into soybean oil and then the wider soybean complex, with rapeseed absorbing the same spillover. Oesterle is direct about how thinly understood the policy piece still is, noting that "We're not quite sure what it is, but the market has reacted very much to the downside on soybean oil". For a crusher or an oilseed buyer the consequence is that the soybean leg is priced off policy and energy as much as off the field.
"China could close the door and say, don't bother us on Iran. And if you do, we might turn off the tap on imports" , Oesterle says, framing the risk sitting underneath an otherwise constructive demand picture. China confirmed purchases of 712,000 tonnes of U.S. soybeans through flash sales over the past week and announced a domestic auction of 290,000 tonnes to create storage space, which points toward more imports rather than fewer. Lower prices strengthen the commercial case for China to step in and buy. Conversely, a new package of sanctions against Iran that extends to anyone supporting Iran drew an immediate response from Beijing warning against interference in that relationship, which puts the commercial logic and the political logic in tension. For origination desks the impact is that Chinese demand cannot be modelled on price alone, because the same buyer can withdraw for reasons that have nothing to do with the crush margin.
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--- Written by Frédéric Guétin, StoneX Media Producer
--- Expert: Bertrand Oesterle, StoneX VP of Clearing & Execution Sales
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Dry soil is slowing winter wheat planting in Russia and Ukraine, with a third of Ukraine's area in moisture deficit. Lost export revenue and costly diesel add a second risk to the size of the next Black Sea wheat crop.
September 23 – The Nasdaq hit another fresh all-time high yesterday, with the S&P 500 close to doing so as well, though stock futures are pointing to a quietly lower start to today’s session after surging higher to start the week as optimism surrounding this week’s various diplomatic pushes abounds. That optimism continues to be reflected in the VIX, continuing to hang around roughly three-week lows, trading at 14.3 this morning. The dollar is surging higher, adding to the week’s gains, as it nears the 101 mark for the first time in nearly two months. Treasury yields are off to a higher start, with 2-year yields back up to 4.80%, 10-year yields at 4.99%, and 30-year yields just above 5.32%. Crude oil prices are looking to hold their ground after a steady decline since late last week, with nearby WTI up 1.3% to trade near $91 and nearby Brent up 1.4% to trade near $100.65 at the time of writing. The ags are mostly lower to start the day, likely influenced in part by managed money selling off some existing length amid hopes for improvement regarding commodity flow through the Black Sea as part of this week’s diplomacy blitz.
September 22 – The Nasdaq and S&P 500 both closed within 1% of their all-time highs yesterday, with stock futures pointing to a quietly higher open at the time of writing. Diplomacy continues to be the theme of the week, with markets pricing in optimism, particularly in the tech sector following encouraging results from the weekend’s meeting between U.S. Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng. It’s also worth noting that Bessent yesterday announced the two sides would be meeting again to discuss AI safety and communication protocols in Shenzen, China in about two months, another potential sign of cooperation instead of escalation. The VIX continues to reflect optimism regarding this week’s various diplomatic pushes as it hovers near its lowest level since early September, starting the day trading just below the 14.7 mark. The dollar is sitting just above unchanged, near 100.46 at the time of writing, touching a fresh two-month high earlier this morning. Treasury yields are quietly lower to start the day, also helping bring some calm to Wall Street, with 2-year yields at 4.747%, 10-year yields at 4.949%, and 30-year yields at 5.279%. Crude oil prices continue their push lower, with nearby WTI down another 1.8% to trade near $90.30 and nearby Brent down 1.6% to trade near $98.70, both roughly two-week lows. The ags are looking at a turnaround Tuesday to kick off the session with most of the complex in the red at the break, led down by the wheat complex. Improving forecasts for planting conditions for the U.S. winter wheat crop are likely having some influence, but I’d also point out the signs of potential increasing U.S. pressure on Ukraine, which we’ll dive into in more depth below, possibly spooking out some managed money length.
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