Biggest Story of Day Is Not Crop Tour; It’s Walmart’s Sales Miss and What It May Mean About Cattle & Beef Prices/Demand 

Deere sees the bottom: farm equipment slump may be nearing its end | Sinograin soybean auction price jumps to $614/mt, strengthening demand signal | Brent oil pushes above $94 as Trump’s ‘Economic D-Day’ raises Iran risk premium | Indonesia’s fuel mandate and El Niño are tightening the vegoil balance; Malaysian palm oil futures highest since December 2024

Link: Farm Bill’s Fate Could Turn on Midterm Results — and
         Lame-Duck Math
Link: Fed Minutes Reveal a Broader Hawkish Bloc, but September Hike
         Is Far From Set
Link: Crop Tour’s Market Footprint: Five Years of Corn and Soybean
         Futures — Plus 2026
Link: Trump Touts Canada Deal as Tariff Breakthrough for U.S. Farmers
Link: Screwworm Confirmed in Juárez Municipality, Raising El Paso
         Border Risk  
Link: China’s Reserve Auctions Are Clearing Fast — and the Price
         Now Reads $597 a Tonne
Link: Ethanol’s Comfortable Cushion Meets Gasoline’s Thin One
Link: Black Sea Port War Pushes the Grain Market Toward a Physical
         Supply Shock
 

Link: Video: Wiesemeyer’s Perspectives, Aug. 16
Video show is now on You Tube,Spotify & Apple
Link: Audio: Wiesemeyer’s Perspectives, Aug. 16 

UP FRONT

■  TOP STORIES

— Sinograin soybean auction price jumps to $614/MT, strengthening demand signal: China’s Aug. 19 reserve soybean sale cleared 85.2% at a sharply higher price, reinforcing evidence of firm nearby crusher demand.

— Brent oil pushes above $94 as Trump’s ‘Economic D-Day’ raises Iran risk premium: Oil surged as tougher U.S. economic pressure on Iran and the UAE’s break with Tehran raised risks to Iranian exports and Hormuz shipping.

■  FINANCIAL MARKETS

— Equities today: Global markets were subdued as Treasury’s expanded long-bond buybacks eased yields while surging oil prices revived inflation and interest-rate concerns.

— Equities yesterday: The Dow, Nasdaq and S&P 500 all finished modestly higher Aug. 19, gaining roughly 0.2%.

— Walmart’s sales miss raises a bigger question: is the consumer finally cracking?: Walmart’s slowdown points to increasingly selective consumers, creating particular risk for high-priced beef as shoppers gain incentives to substitute cheaper proteins.

■  AGRIBUSINESS

— Deere sees the bottom: farm equipment slump may be nearing its end: Deere says 2026 could mark the cyclical low for agricultural machinery, although weak large-equipment sales suggest any meaningful recovery likely waits until 2027.

■  AG MARKETS

— USDA daily export sale: 150,000 MT soybeans to unknown destinations: USDA reported another new-crop soybean sale, adding to evidence of strengthening export demand.

— More than 1 MMT soybean sales to China; new-crop sorghum sales: Weekly data showed 1.131 MMT of 2026/27 soybean sales to China along with new-crop sorghum business.

— Corn breaks $5 as crop tour raises yield doubts; wheat adds Black Sea premium: Corn topped $5 as Illinois Crop Tour findings challenged USDA yield optimism, while Black Sea shipping disruptions strengthened wheat.

— Indonesia’s fuel mandate and El Niño are tightening the vegoil balance: Palm oil approached 5,000 ringgit as Indonesia’s B50 biodiesel mandate, El Niño risk and Black Sea disruptions tightened global vegetable-oil supplies.

— Sugar rally signals a weather market as ‘Super El Niño’ threatens supply: Sugar’s sharp rally reflects mounting supply threats in India, Thailand and Brazil as traders increasingly price stronger El Niño risks.

— Agriculture markets yesterday: Grains, soy products, wheat, cotton and hogs finished higher Aug. 19, while live and feeder cattle posted sizable declines.

■  WEATHER

— NWS outlook: Excessive rainfall and flooding remained the major eastern Corn Belt threat, while severe storms threatened parts of the western Belt and extreme heat persisted farther south.

— Corn Belt flooding gives way to cooler, drier pattern: Flood damage remains a yield concern in Illinois, Indiana and Ohio, but the coming cooler, drier regime should favor surviving corn and soybean crops.

■  TOP STORIES

—Sinograin soybean auction price jumps to $614/mt, strengthening demand signal
Aug. 19 price rose 2.7% even as buyers cleared 85% of the offering

The most important number from China’s latest imported- oybean auction is no longer the 85.2% clearance rate — it is the price. Mysteel and other Chinese market reports put the Aug. 19 average transaction price at 4,132 yuan per metric ton, equivalent to approximately $614 per MT using the Aug. 19 yuan-dollar exchange rate.

That represents a substantial step higher from Sinograin’s previous reserve sales. The Aug. 12 auction averaged 4,023 yuan/MT, while the Aug. 5 sale averaged 4,013.5 yuan/MT. Mysteel reported that the Aug. 12 auction sold 461,213 MT of the 516,613 MT offered, an 89.28% clearance rate. Reuters reported the Aug. 5 sale averaged 4,013.5 yuan/MT with roughly two-thirds of the 501,000 MT offering sold.

The Aug. 19 increase therefore amounts to 109 yuan/MT, or 2.7%, in just one week. Converted using the respective historical exchange rates, the move is even easier to appreciate: the Aug. 12 price was approximately $596.60/MT, compared with $613.99/MT on Aug. 19 — an increase of about $17.40 per MT.

Compared with Aug. 5, the rise is larger still. That auction price converted to roughly $594.80/MT, meaning Sinograin’s beans fetched about $19.20 per MT more two weeks later.

For another frame of reference, $614/MT works out mathematically to roughly $16.71 per bushel of soybeans. That should not be compared directly with a Chicago futures price because the Chinese auction price is a domestic seller-truck-board price involving different freight, tax, location, quality and delivery considerations. Mysteel’s auction notices specifically describe the sale price as seller truck-board delivery from the storage location. But the conversion illustrates the value Chinese crushers are willing to place on readily available beans.

The four-auction trend is increasingly constructive. The progression of Sinograin’s recent auctions tells a clearer story when price and clearance rates are viewed together:

• July 31: 4,033.1 yuan/MT average; 49.35% sold. Reuters reported about 248,618 MT of the roughly 504,000 MT offering changed hands.

• Aug. 5: 4,013.5 yuan/MT; 66.58% clearance.

• Aug. 12: 4,023 yuan/MT; 89.28% clearance.

• Aug. 19: 4,132 yuan/MT; 85.2% clearance.

That sequence is important. Initially, Sinograin had to accept relatively modest participation around the 4,000-yuan level. Buyer participation then accelerated dramatically. Rather than forcing Sinograin to lower its price to keep soybeans moving, the latest auction produced the highest average price of the series while still clearing more than five-sixths of the offering.

Since July 31, the average auction price has risen almost 99 yuan/MT, or roughly 2.5%, while the clearance rate has jumped nearly 36 percentage points.

That is a healthier market signal than rising clearance alone. The 4,132-yuan price is the bullish part. Sinograin’s Aug. 19 starting prices reportedly ranged from 3,910 to 4,130 yuan/MT. Yet the weighted average transaction price finished at 4,132 yuan/MT, slightly above even the upper end of the starting-price range.

Because individual lots differ by location, age, quality and delivery conditions, the comparison should not be interpreted as every lot trading above 4,130 yuan. But an overall average above the top starting level indicates that competitive bidding lifted enough individual lots above their reserve prices to pull the weighted average higher.

In other words, buyers were bidding for the beans rather than merely taking discounted government stocks. That matters. If Sinograin were primarily trying to unload unwanted inventory, one would expect either falling prices, falling clearance rates or both as repeated auctions added supply to the market. Instead, the opposite has occurred: sell-through strengthened dramatically and the latest clearing price jumped.

Smaller offering helped — but does not explain everything. There is one important qualification. Sinograin offered only 361,727.749 MT on Aug. 19, substantially below the 516,612.577 MT auctioned Aug. 12. Mysteel confirms the larger Aug. 12 offering. A roughly 30% reduction in available tonnage would naturally make it easier to maintain both a high clearance rate and a stronger price. So the Aug. 19 price increase cannot be interpreted as a pure measure of underlying Chinese soybean demand. Changes in the geographic mix, quality and delivery timing of the lots also can affect the average.

But that caveat only goes so far. Buyers still purchased 308,114 MT at a sharply higher average price. Sinograin did not have to mark down its inventory to maintain an 85% clearance rate. That is the significant takeaway.

Warehouse rotation appears to be working. The auctions also fit Sinograin’s broader effort to rotate older imported soybeans and create storage capacity for incoming U.S. cargoes. Reuters previously reported traders expected Sinograin to continue auctioning reserves as new U.S. purchases arrive. China has stepped up U.S. soybean purchases this summer following agricultural trade commitments between Washington and Beijing. Reuters reported earlier in August that Sinograin’s auctions were specifically aimed in part at creating room for incoming U.S. soybeans.

What is notable now is that the rotation is apparently taking place without Sinograin having to sacrifice price. That improves the economics of the operation. Sinograin can sell older inventories into a receptive domestic crushing market, free storage capacity and replace those beans with newer imports.

For the global soybean market, that is more constructive than a scenario in which government stocks must be dumped cheaply into the domestic market before new cargoes can arrive.

What the price says about Chinese crushers. The auction also provides information about Chinese commercial demand that import statistics alone cannot provide. China can simultaneously have large soybean imports and individual crushers that need beans in particular locations or delivery periods. An oilseed processor cares about the cost of beans available at its plant and the margin available from soybean meal and soybean oil — not simply China’s aggregate national inventory.

The willingness to pay 4,132 yuan, or about $614/MT, therefore suggests that immediately accessible reserve beans have real commercial value.

It does not necessarily mean China suddenly faces a national soybean shortage. But it does suggest that crushers are sufficiently interested in securing physical supplies that a large government offering can clear at rising prices.

Bottom line: The final Aug. 19 numbers — 361,728 MT offered, 308,114 MT sold, an 85.2% clearance rate and a 4,132-yuan/MT average transaction price — are considerably more bullish than the initial volume report suggested. The key number is 4,132 yuan, equivalent to about $614/MT. A week earlier buyers paid roughly $596-$597/MT. Two weeks earlier they paid about $595/MT. Yet buyers still absorbed 85% of Sinograin’s latest offering. The signal is not simply that China can move reserve soybeans. It is that buyers are willing to pay increasingly more for them.

That strengthens the argument that Chinese crushers have firm nearby demand, that Sinograin’s inventory-rotation program is functioning smoothly and that freeing warehouse space for incoming U.S. soybeans does not currently require aggressive discounting.For soybean markets, the rising auction price is a more constructive signal than the clearance rate itself.

One grain industry analyst notes: “Chinese commercials will buy U.S. soybeans as soon as tariffs are rolled back… assuming that gets done before, during or shortly after the Trump/Xi meeting.”

—Brent oil pushes above $94 as Trump’s ‘Economic D-Day’ raises Iran risk premium
UAE break with Tehran shifts pressure from missiles to economic isolation

Oil prices accelerated higher Thursday as President Donald Trump threatened what he called an “Economic D-Day” against Iran, adding a new financial and trade dimension to a conflict that has already sharply restricted energy flows through the Strait of Hormuz. October Brent climbed $2.44, or 2.7%, to $94.06 per barrel, while expiring September West Texas Intermediate (WTI) reached $87.67. The more-active October WTI contract was up $2.41 at $86.80. Both benchmarks were headed for a fifth consecutive daily gain and their highest levels since July 24.

The immediate market reaction is important because Trump has not yet laid out a detailed list of new sanctions. Instead, traders are pricing the possibility that Washington is preparing to move from squeezing Iran itself to penalizing the countries, banks, refiners, shipping companies and other intermediaries that keep Iran connected to the world economy.

Trump warned that any country allowing its financial institutions, businesses, airports or government entities to provide an economic lifeline to Iran could face major U.S. economic consequences. Reuters noted that Trump did not specify exactly what measures would be imposed or identify individual countries.

The oil market is reacting less to sanctions that have already removed barrels than to the possibility that the next stage could remove substantially more barrels — or provoke another Iranian response in the Strait of Hormuz.

The UAE move makes Trump’s threat more credible. The most consequential development may actually have occurred before Trump’s announcement. The United Arab Emirates has suspended all trade, commercial exchanges and financial transactions with Iran until further notice, after the UAE said it detected two Iranian ballistic missiles aimed at maritime traffic. Iran denied the allegation. The UAE is not merely another Iranian trading partner. Dubai has been one of Tehran’s most important gateways into the international commercial and financial system, giving Iranian companies access to imports, foreign currency, shipping services and intermediaries that are difficult to obtain directly under U.S. sanctions. Reuters described Dubai as one of Tehran’s most critical economic lifelines. That makes the UAE action potentially more damaging than another round of sanctions against Iranian companies already largely isolated from Western markets.

It also illustrates the broader strategy implied by Trump’s announcement: rather than simply sanction Iran again, Washington may try to force third countries to choose between doing business with Tehran and retaining access to the U.S. financial system and U.S. market.

China is the real test. The biggest question is China. China purchases more than 80% of Iran’s seaborne oil exports, according to Kpler data cited by Reuters. Much of that crude goes to smaller independent Chinese refiners, commonly called “teapots.”

Washington therefore has several potentially powerful options. It could sanction additional Chinese independent refiners purchasing Iranian crude, target banks facilitating settlement of those transactions, sanction shipping companies and registries involved with Iran’s shadow fleet, or increase pressure on intermediaries converting Iranian oil revenue into imports and foreign currency.

Treasury was already moving aggressively in that direction under its existing Economic Fury campaign. Previous actions have targeted Iran’s shadow banking network, oil tankers, maritime insurers, weapons suppliers and cryptocurrency channels. Treasury has also warned that foreign companies and financial institutions facilitating Iranian trade could face secondary sanctions.

The “Economic D-Day” announcement therefore appears, at least initially, to be an escalation of enforcement and secondary pressure rather than an entirely new sanctions architecture.

But China presents Washington with a much larger problem than the UAE. Sanctioning small Chinese refiners carries relatively limited systemic risk. Targeting major Chinese banks would be another matter entirely and could trigger retaliation from Beijing, including in critical minerals and other trade relationships. Reuters reported that Treasury has previously warned larger Chinese banks about Iranian transactions but stopped short of sanctioning them.

Analysts say that is probably the most important indicator to watch next. If Washington begins sanctioning major Chinese financial institutions rather than additional Iranian shell companies and tankers, “Economic D-Day” will have moved from rhetoric into a substantially more consequential phase.

Why oil is rising even though U.S. crude inventories increased. Ordinarily, Wednesday’s U.S. inventory report should have taken some steam out of crude. U.S. commercial crude inventories unexpectedly increased 4.4 million barrels last week, while gasoline inventories also rose. But distillate inventories — diesel and heating oil — fell by another 1.5 million barrels. The market is largely looking past the crude build because the central issue is no longer how much oil exists in storage. It is where the oil is located, whether refiners can obtain it and whether finished fuels can reach consumers without passing through increasingly dangerous shipping lanes.

The Strait of Hormuz illustrates that vulnerability. EIA estimates that roughly 20.9 million barrels per day of petroleum liquids moved through Hormuz during the first half of 2025 — equivalent to about 20% of global petroleum consumption and roughly one-quarter of maritime-traded oil. Saudi and UAE pipelines capable of bypassing Hormuz provide only about 4.7 million barrels per day of alternative capacity. Current Hormuz traffic remains far below prewar levels, Reuters reported Thursday. That leaves the market with little margin for another meaningful disruption.

The risk premium is becoming structural. Early in the Iran conflict, crude markets repeatedly treated military escalation as temporary: prices jumped when vessels were attacked or negotiations broke down and retreated when ceasefire hopes returned.

That psychology is changing. Nearly six months of disrupted shipping, failed ceasefires and repeated confrontations are forcing refiners, shipping companies and commodity traders to consider the possibility that restricted Gulf flows are not a short-lived interruption but a persistent feature of the energy market. The UAE’s economic break with Tehran reinforces that concern. Diplomatic and commercial relationships that previously provided channels for de-escalation are themselves being dismantled. That helps explain why oil prices have risen for five consecutive sessions even without one dramatic new supply outage.

What would send Brent above $100? The next major upside move probably requires one of three developments:

First, tougher sanctions on Chinese buyers. If Washington meaningfully impairs the ability of Chinese refiners or banks to purchase and finance Iranian crude, physical Iranian exports could fall further.

Second, another deterioration in Hormuz shipping. Attacks on commercial vessels, restrictions on passage or a further reduction in Gulf exports would quickly add additional risk premium.

Third, broader regional retaliation. If the UAE embargo triggers Iranian retaliation against Emirati energy infrastructure or shipping, the market would have to price risk not merely to Iranian production but to supplies from other Gulf producers.

Conversely, a credible U.S./Iran agreement that restores predictable Hormuz traffic remains the clearest bearish catalyst. Rising U.S. crude inventories also provide some cushion if geopolitical tensions stabilize.

Agricultural impact: diesel remains the pressure point. For U.S. agriculture, crude approaching $90 matters, but diesel is the more immediate concern. Distillate inventories are already tight as U.S. refiners export fuel into a global market disrupted by both the Middle East conflict and reduced Russian supplies. A prolonged crude rally therefore threatens to raise harvest fuel, trucking, rail and barge costs just as the U.S. enters the heavy fall crop-movement period. Higher petroleum prices can also work through fertilizer manufacturing and transportation costs, while supporting renewable diesel economics and potentially strengthening the value of soybean oil and other biofuel feedstocks.

There is a broader macroeconomic consequence as well. Sustained $90-to-$100 crude would make the Federal Reserve’s inflation problem more complicated by raising transportation and consumer fuel costs even as policymakers assess whether monetary policy can be eased.

Bottom line: Trump’s “Economic D-Day” is not yet important because Washington has unveiled a specific new sanction capable of immediately removing millions of barrels from the market. It is important because the administration is signaling that the next target may be the international economic infrastructure that allows Iran to survive existing sanctions. The UAE has already removed one of Tehran’s most important commercial gateways. China is the next and far more difficult test. Oil traders are therefore pricing two related risks simultaneously: fewer Iranian barrels if secondary sanctions succeed, and fewer Gulf barrels if Iran responds by tightening its grip on Hormuz. That combination explains why Brent is pressing $94 despite rising U.S. crude inventories. The critical threshold is no longer simply whether Iran produces oil. It is whether Washington can prevent Iran from selling it without triggering retaliation that restricts everyone else’s oil as well.

■  FINANCIAL MARKETS

—Equities today: Global markets were subdued Thursday as investors weighed two competing forces: an unusual U.S. Treasury move that temporarily relieved pressure on long-term government bonds and another surge in oil prices that threatens to keep inflation — and interest rates — higher for longer. U.S. stock futures were mixed to modestly lower, while long-dated Treasury yields remained below this week’s peaks but were already giving back some of Wednesday’s dramatic decline. Brent crude was trading over $94 per barrel and West Texas Intermediate over $87 as Middle East tensions intensified.

The combination is creating an increasingly complicated environment for equities. Lower bond yields are normally a clear positive for stocks because they reduce financing costs and improve the relative valuation of future corporate earnings. But if those lower yields are being produced partly through government intervention while oil is simultaneously adding to inflation pressures, investors have reason to question how durable the bond rally can be.

Treasury’s intervention bought time — not a solution. The biggest development as we noted Wednesday remains the Treasury Department’s surprise decision Wednesday to at least double its long-end liquidity-support buybacks, raising the maximum size of operations involving 10- to 20-year and 20- to 30-year securities from $2 billion to at least $4 billion beginning Sept. 9. The larger operations will remain in place through the current refunding quarter ending Nov. 4.

The immediate effect was dramatic. The 30-year Treasury yield, which had climbed above 5.3% and to its highest level since 2007, dropped roughly 10 basis points following the announcement. Global bond markets followed, with yields easing in Europe and Japan as well.

But the distinction between providing liquidity and solving the government’s financing problem is crucial. Treasury is effectively exchanging newer, more liquid government debt for older, less-liquid securities. It is not eliminating federal debt or fundamentally reducing the government’s financing needs. That makes the move very different from Federal Reserve quantitative easing, even though the immediate market reaction — higher bond prices, lower yields and stronger risk assets — resembles QE.

That distinction explains why the initial rally is already losing some momentum. The 30-year yield moved back around 5.22% Thursday morning and the 10-year yield toward 4.67%.

JPMorgan strategists have warned that larger buybacks could eventually prove counterproductive if investors conclude Washington is attempting to suppress long-term rates without addressing the fiscal deficit. In that case, investors may demand an even larger term premium to own long-dated Treasury securities.

That is the larger market message: Treasury demonstrated that it is uncomfortable with long-term yields above roughly 5.25%-5.30%, but it has not demonstrated that it can permanently keep them below those levels.

Oil is now the counterweight. Just as Treasury was attempting to reduce borrowing costs, energy markets were moving in the opposite direction. Brent crude surged above $94 per barrel and U.S. crude cleared $87, as renewed Middle East tensions and the Trump administration’s escalating economic pressure on Iran raised concerns about supply and transportation disruptions. That matters far beyond the petroleum market.

Oil approaching $100 again raises transportation, manufacturing and household energy costs and threatens to bleed into headline inflation. More importantly for financial markets, higher oil complicates the Federal Reserve’s ability to respond to any weakening in employment or economic growth.

The July FOMC minutes released Wednesday reinforced that problem. Several participants favored raising rates by 25 basis points at the July meeting, while officials indicated they remained prepared to tighten further if inflation failed to improve.

So investors are confronting an unusual policy divergence: Treasury is trying to bring long-term borrowing costs down while inflation and geopolitical forces are giving the Fed reasons to keep monetary policy restrictive. That tug-of-war could produce significantly more volatility in the long end of the yield curve.

Why markets are not celebrating lower bond yields. The subdued equity reaction to Treasury’s announcement may therefore be more revealing than the initial bond rally. Under normal circumstances, a nearly 10-basis-point decline in the 30-year Treasury yield would provide substantial support to stocks. Instead, the S&P 500, Dow and Nasdaq managed gains of only about 0.2% Wednesday, and futures were struggling for direction Thursday morning. Investors appear to recognize that Treasury’s action changes market mechanics, but not necessarily the underlying macroeconomic problem.

Three risks remain:

• Oil: Brent above $94 threatens to revive inflation.

• Fiscal policy: Federal debt has now exceeded $40 trillion, keeping Treasury supply and term-premium concerns elevated.

•Fed policy: The July minutes showed policymakers remain much more concerned about inflation than markets had hoped.

That makes the Treasury intervention more of a circuit breaker than an all-clear signal.

Market bottom line: The emerging market structure is unusual. Treasury has effectively revealed that disorderly increases in long-term yields matter enough to trigger intervention, creating what investors may increasingly treat as an informal policy backstop.

But there is a limit to what buybacks can accomplish. If oil remains above $90, inflation expectations rise and federal borrowing continues increasing, investors may simply demand higher yields to absorb new government debt. In that environment, Treasury can improve liquidity, but it cannot manufacture permanent demand for 20- and 30-year securities.

For stocks, therefore, the most bullish development Thursday is not necessarily Treasury’s intervention. It would be oil prices retreating and long-term yields remaining lower without additional government support. Until that happens, global markets are likely to remain caught between two competing forces: Washington trying to relieve financial-market pressure and energy-driven inflation continuously rebuilding it.

For agriculture, the implications are similarly mixed. Higher crude oil supports biofuel economics and potentially grain demand, but it also raises diesel, transportation and eventually fertilizer costs. Meanwhile, Deere’s results suggest the farm-equipment downturn may finally be nearing its cyclical bottom — an encouraging signal, but one that will ultimately depend on whether improving grain prices translate into stronger producer margins.

In Asia, Japan +1.4%. Hong Kong +0.8%. China +0.2%. India +0.8%.

In Europe, at midday, London -0.3%. Paris -0.4%. Frankfurt -0.7%.

—Equities yesterday: 

—Walmart’s sales miss raises a bigger question: is the consumer finally cracking?

Consumer strain could become the next major test for record-high beef prices

Walmart’s rare quarterly sales disappointment is flashing a caution signal about the U.S. consumer — but it is not yet evidence that households have simply “run out of money.” The more important message is that consumers are becoming increasingly selective about where they spend it, a shift that could have important consequences for beef, cattle and meat prices if the pattern intensifies.

Walmart shares were sharply lower Thursday morning, with early indications ranging from roughly 6% to more than 8% depending on the premarket snapshot, after Walmart U.S. comparable-store sales increased just 2.6%, well below the roughly 3.8% Wall Street expected. That was the slowest comparable-sales growth since early 2020. The previous quarter had produced 4.1% growth.

Perhaps more telling, Walmart’s average transaction increased only 1.1%, compared with 3.1% growth a year earlier. Shoppers are still showing up, but they appear less willing — or less able — to increase what they put in the basket. Reuters reported that consumers continued prioritizing groceries and necessities over discretionary merchandise as higher fuel costs squeezed household budgets.

But there is an important qualification. Walmart’s headline 2.6% comparable-sales figure was depressed by lower prescription-drug prices resulting from Medicare drug-price changes. Excluding that effect, U.S. comparable sales increased 3.4%. Total revenue increased nearly 6%, grocery sales posted mid-single-digit growth, U.S. e-commerce surged 24% and Walmart actually raised its full-year sales outlook to growth of 4% to 5%.

That is hardly what consumer collapse looks like, with analysts saying it looks more like consumer compression.

The Walmart warning is about spending power at the margin. Walmart is arguably one of the best places to look for early evidence of household financial stress because it has been one of the largest beneficiaries when consumers trade down. Higher-income consumers have increasingly shopped Walmart for groceries while lower- and middle-income households have concentrated more of their spending on necessities.

That makes Thursday’s miss significant. As Brian Jacobsen of Annex Wealth Management told Reuters, Walmart has been winning the consumer “trade-down” for some time, meaning a slowdown there potentially signals that even the value channel is encountering resistance.

There is corroborating evidence. U.S. retail sales unexpectedly dropped 0.6% in July, the first decline in nine months and the largest in 14 months. Inflation-adjusted wages were also down 0.2% from a year earlier in July. Consumer prices were still 3.4% higher than a year earlier, and the recent rebound in oil prices threatens to put renewed pressure on gasoline and household energy expenses.

So consumers haven’t run out of money. Their discretionary cushion is getting thinner. And that distinction is particularly important for agriculture.

Beef may be where the consumer stress test becomes most visible. Few grocery items illustrate the affordability issue better than beef. July’s Consumer Price Index showed beef and veal prices 9.4% above a year earlier, while ground beef was up 9.0%, beef steaks 9.6% and roasts a striking 13.5%. By comparison, pork prices were only 0.5% higher and chicken prices were 2.7% lower than a year earlier. That price spread gives consumers an increasingly obvious substitution choice at the meat counter.

A family looking at beef that costs roughly 10% more than last year beside chicken that costs nearly 3% less does not have to stop buying meat. It can simply buy a different protein. That is probably the most important cattle-market implication from Walmart’s results.

Beef demand has remained remarkably resilient despite record prices. USDA has repeatedly noted that consumer demand has held up in the face of historically tight supplies and high wholesale values. But Walmart’s results suggest the price elasticity question is becoming more important: At what price does the consumer finally begin trading away from beef in meaningful volume?

We may be getting closer to finding out. Tight cattle supplies still provide a powerful floor. The complication for cattle bears is that beef’s price problem is primarily a supply problem, not excessive demand. USDA reported only 28.5 million beef cows as of July 1, down 1% from last year, while the 2026 calf crop was estimated at 32.5 million head, down another 2%. The nation’s cattle supply remains near a 75-year low.

That scarcity has pushed cattle costs to historic levels. USDA’s July outlook projected 2026 slaughter steer prices averaging about $251.10 per cwt, while the June five-area steer price averaged $258.23 — nearly $23 above a year earlier. Feeder steer prices are forecast near $376 per cwt for the year.

That means weaker consumers do not automatically equal sharply lower cattle prices. Instead, the first casualty could be packer and retailer margins. Tyson Foods is already expecting losses of as much as $650 million in its beef business as processors confront cattle costs that have risen faster than beef prices they can pass through to consumers. The company has announced additional beef-plant closures and sales as it adjusts slaughter capacity to the smallest cattle supply in roughly 75 years.

If Walmart and other large grocers conclude shoppers cannot absorb another round of beef inflation, retailers will become more resistant to wholesale price increases. Packers would then face an uncomfortable squeeze: record-priced cattle on one side and increasingly price-sensitive consumers on the other.

That could restrain boxed-beef values, compress packer margins further and eventually cause processors to slow slaughter or become less aggressive bidding for cattle.

Watch the protein mix, not just total grocery sales. This is why Walmart’s mid-single-digit grocery growth should not automatically be interpreted as bullish meat demand. Consumers can spend more dollars at Walmart while purchasing fewer premium products. They can move from steaks to hamburger, from ribeyes to cheaper roasts, from beef to pork, from pork to chicken, or from large family packs to smaller package sizes. Private-label penetration can also rise.

Smithfield Foods recently cited cautious consumer spending and shifts toward smaller and less-expensive purchases when it reduced its annual outlook. That is the behavior cattle and meat markets should watch carefully.

Bottom line: Walmart’s sales miss does not say U.S. consumers are out of money. It says they are becoming much more deliberate about how they spend it. Consumers are still buying food and Walmart is still gaining business, but the willingness to absorb price increases is weakening. For beef, that could become increasingly consequential. The cattle shortage probably prevents a conventional price collapse because animals simply are not plentiful enough. But record cattle prices increasingly require record or near-record beef prices downstream. If consumers begin resisting those prices by switching aggressively into chicken and pork, the adjustment could show up first in boxed beef, packer margins and slaughter rates — and eventually in how aggressively packers bid for cattle. The cattle market’s next major risk may therefore not be bigger cattle supplies. It may be discovering that the American consumer has finally reached his or her limit on what they will pay for beef.

■  AGRIBUSINESS

—Deere sees the bottom: farm equipment slump may be nearing its end

Large ag demand is still weak, but healthier inventories point to 2027 

Deere & Co.’s fiscal third-quarter results delivered something the agricultural economy has seen relatively little of lately: evidence that conditions may be approaching a cyclical floor rather than continuing to deteriorate.

That does not mean farmers have suddenly returned to machinery dealerships. Deere’s core large-equipment business remains under considerable pressure, and industry tractor and combine sales confirm that farmers are still cautious. But Deere CEO John May’s assertion that 2026 should mark the bottom of the current agricultural equipment cycle is increasingly important because equipment manufacturers typically begin seeing stabilization only after farm profitability, dealer inventories and used-equipment markets have started turning.

In other words, Deere is not signaling a farm equipment boom. It is signaling that the worst of the contraction may be close to over.

Deere reported third-quarter earnings of $5.10 per share, comfortably above the roughly $4.70 expected by analysts. Net income increased to $1.379 billion from about $1.29 billion a year earlier, Deere’s first quarterly profit increase in three years, according to Reuters. Equipment net sales increased about 6% to roughly $11 billion, while the company raised the bottom of its fiscal 2026 net-income forecast to $4.75 billion from $4.5 billion, leaving the high end at $5 billion.

The headline numbers are stronger than agriculture itself. There is an important qualification. Much of Deere’s improved corporate performance did not come from row crop agriculture. Construction and Forestry sales jumped 18%, supported by infrastructure spending, oil and gas activity and especially equipment demand surrounding the massive buildout of AI-related data centers. Deere also received a roughly $110 million tariff refund, which helped quarterly profit.

Meanwhile, Deere’s Production and Precision Agriculture business — large tractors, combines and other equipment most closely tied to corn and soybean producers — saw sales decline about 6% to $4 billion.That is why the earnings report should not be interpreted as evidence that the farm economy itself has already turned. It is better viewed as a turning-point indicator.

Large ag equipment demand is still clearly weak. The latest industry data underscore that distinction. Association of Equipment Manufacturers data showed total U.S. farm tractor sales falling 10.9% from a year earlier in July, leaving sales through July down 13.1%. Self-propelled combine sales fell 5.3% in July and were down 10.2% year to date. The biggest equipment remains particularly soft: four-wheel-drive tractor sales plunged 38.7% in July and were down 27% through the first seven months of the year.

Those figures hardly resemble a recovery.

But agricultural machinery cycles typically turn before year-over-year sales statistics look healthy. The first stage is usually inventory correction. Production gets reduced, excess new machinery clears from dealer lots, late-model used equipment is absorbed, and manufacturers eventually reach the point where production can once again track underlying replacement demand rather than inventory liquidation.

Deere appears much further along that process. During its previous earnings call, Deere said North American inventories of new high-horsepower tractors and combines had fallen more than 50% from their mid-2024 peaks and returned to inventory-to-sales ratios near historical norms. Used combine and high-horsepower tractor inventories were down by the mid-teens from their cycle highs, while inventories of certain late-model 8R tractors had fallen roughly 45% from their peak. Used sprayer inventories were down about 30% and planter inventories roughly 50%.

That inventory cleanup may ultimately prove more important than Deere’s quarterly earnings beat.

Why machinery usually lags the grain market. Large equipment purchases are among the most discretionary investments a crop producer makes. A farmer may continue buying fertilizer, seed and chemicals during a margin squeeze because those inputs are required to produce a crop. A $500,000 tractor or $700,000 combine can often be deferred another year. That makes equipment demand a lagging indicator of farm profitability.

The 2021-2023 farm-income boom generated extraordinary machinery demand, while pandemic-related supply shortages simultaneously restricted equipment availability. When grain prices subsequently declined, interest costs increased and production expenses stayed elevated, farmers pulled back sharply. Many producers had also recently upgraded equipment, reducing the immediate need for replacement. That combination produced an unusually deep large-equipment correction.

The significance of Deere’s 2026-bottom forecast is that several pieces required to reverse that process are beginning to fall into place.

First, dealer and used inventories have been reduced substantially. That limits the amount of old machinery that must be worked through before manufacturers can increase production.

Second, Deere has already cut production aggressively. A recovery therefore would not require a return to boom-time farmer spending. Even modestly better replacement demand could produce positive year-over-year comparisons from today’s depressed base.

Third, crop prices have recently shown signs of improvement. If the recovery in corn and soybean prices proves durable rather than temporary, projected 2027 producer margins would improve — and machinery buying decisions would likely follow.

That third condition remains the critical one.

Livestock producers are already telling a different story. 

There is another encouraging agricultural signal buried in Deere’s numbers. Sales in Small Agriculture and Turf increased 12%, with Deere citing stronger milk and beef prices as supportive for demand. That divergence is revealing.

The machinery market is increasingly reflecting the split within agriculture: row crop producers remain financially constrained, while cattle and dairy producers are generally operating with considerably stronger margins. Record or near-record cattle prices have increased the ability of livestock operations to replace smaller tractors, loaders and hay equipment. Deere therefore provides something close to a real-time demonstration of how commodity profitability eventually flows through the rural capital-spending cycle. If corn and soybean margins eventually improve, large-ag machinery could follow the same path — albeit with a lag.

What would turn Deere’s bottom call into a genuine recovery? The most bullish scenario for farm machinery is not simply higher corn or soybean futures for several weeks. Deere needs sustained improvement in producer cash flow. That would likely require some combination of firmer crop prices, stronger export demand, manageable fertilizer costs, lower financing rates, government support payments and continued improvement in used-equipment values.

If those factors line up, the 2027 model-year ordering cycle could begin showing measurable improvement. But there is an important downside risk: a bottom can be long and flat. Should corn and soybean prices retreat after harvest, input costs remain elevated or interest rates stay restrictive, farmers could continue extending replacement intervals even though equipment inventories are healthier. Deere’s large-ag business could then stabilize without producing a meaningful rebound.

Bottom line: Deere’s third-quarter report is more encouraging for agriculture than the 6% decline in its Production and Precision Agriculture sales initially suggests. The company is effectively arguing that the industry has moved from inventory liquidation toward stabilization. The latest retail sales data say large-ag remains weak, but Deere’s dramatically cleaner dealer and used-equipment inventories suggest much of the correction has already occurred. That makes 2027 increasingly important.

If crop profitability improves during the next six to 12 months, machinery demand would not need to return anywhere close to the highs of the previous cycle for Deere’s agricultural business to begin growing again. Replacement demand postponed during 2024-2026 could gradually return, producing a classic cyclical rebound from a depressed base.

The key signal from Deere, therefore, is not that farmers are buying again in force. It is that Deere increasingly believes they have stopped moving farther away from that point.

■  AG MARKETS

—USDA daily export sale: 150,000 MT soybeans to unknown destinations during the 2026/2027 marketing year.

—More than 1 MMT soybean sales to China; new crop sorghum sales. USDA weekly Export Sales data for the week ended Aug. 13 shows activity for 2026/27 to China including 1.131 MMT of soybeans (commitments are shown as 5.688 MMT as of Aug. 13), and sales of 13,500 MT of sorghum. Activity for 2025/26 included net sales of 213 MT of sorghum and net sales reductions of 4,761 running bales of upland cotton. Activity for 2026 included net sales of 862 MT of beef (new sales of 994 MT) and net sales of 374 MT of pork (new sales of 489 MT).

—Corn breaks $5 as crop tour raises yield doubts; wheat adds Black Sea premium

Illinois corn results challenge USDA optimism as weaker dollar, export demand and Black Sea disruptions lift the grain complex

U.S. grain futures extended their rally overnight Thursday, Aug. 20, with December corn pushing above $5.00 for the first time in roughly three months, soybeans adding to recent gains and wheat strengthening as increasingly serious Black Sea shipping disruptions add a geopolitical premium to an already firmer agricultural commodity complex.

At the latest overnight readings, December corn traded at $5.0375, up 5 3/4 cents; November soybeans at $12.4175, up 4 1/2 cents; September soybean meal at $320.50, up $1.60; September soybean oil at 70.57 cents, up 0.71 cent; December SRW wheat at $7.035, up 6 cents; and December HRW wheat at $7.7925, up 2 1/2 cents.

Corn reached a three-month high overnight, while soybeans and both winter wheat contracts reached three-week highs. A weaker U.S. dollar, which fell to nearly a three-month low, is providing additional support to U.S. agricultural commodities.

The most important development for the corn market, however, is occurring in the fields. 

Illinois results put USDA’s yield assumptions under greater scrutiny. Wednesday’s Pro Farmer Crop Tour results from Illinois provided the market with its strongest evidence so far that USDA’s August corn yield expectations may contain more downside risk than traders previously assumed.

Tour scouts calculated Illinois corn yield potential at 184.19 bushels per acre, down 7.7% from 199.57 bushels last year and 7.5% below the three-year Tour average of 199.15 bushels. The Tour collected 217 Illinois corn samples.

That stands in striking contrast to USDA’s August estimate of 212 bushels per acre, only 0.9% below last year’s 214-bushel yield.

The 184.19-bushel Tour calculation should not be directly substituted for USDA’s 212-bushel state forecast. Pro Farmer specifically cautions against comparing raw Tour calculations directly with USDA because the Tour has known historical biases by state; the more useful comparison is how this year’s Tour result changes relative to the previous year’s Tour.

But that comparison is precisely what makes the Illinois result important.

USDA is essentially saying Illinois yield potential slipped only slightly from 2025. The Crop Tour is showing deterioration closer to 8%. That gap in the direction and magnitude of the year-to-year change is what traders are beginning to price.

Illinois is too important to national production for that signal to be ignored. If subsequent field evidence indicates that the eastern Corn Belt’s excessive rainfall, flooding, wind damage and disease pressure have taken more bushels than USDA incorporated into its August estimates, traders will increasingly question whether the national yield can remain near USDA’s current projection.

$5 corn is more than a round number. December corn’s move through $5.00 is psychologically and technically significant. The market spent much of the summer assuming that large acreage and substantial production would eventually overwhelm weather concerns. The rally is beginning to challenge that narrative.

The issue is no longer simply whether the U.S. produces a large corn crop. It almost certainly will. The emerging question is how large. A 16-billion-bushel crop and a materially smaller crop can produce very different balance sheets when export demand is strong and Black Sea supplies are becoming less dependable. USDA’s August global outlook raised projected 2026-27 U.S. corn exports by another 2 million metric tons to 83 million metric tons, specifically citing reduced competition from other exporters. USDA simultaneously cut its Ukraine corn export forecast by 1 million tonnes because of worsening Black Sea logistical disruptions.

That means yield losses that might otherwise have been absorbed by abundant supplies can matter considerably more if the U.S. is simultaneously being asked to capture additional world demand. The corn market is shifting from debating whether supplies are large to debating whether they are large enough.

A sustained close above $5.00 would reinforce that change in psychology. Failure to hold the level would suggest the latest move remains largely a weather-and-Tour rally. Holding it would encourage additional short covering and potentially force commercial users to reassess coverage.

Western Iowa adds to the corn questions. Partial Iowa numbers do not suggest crop failure, but they reinforce the pattern of less corn than last year’s unusually strong crop.

Pro Farmer found:

District 1: 191.80 bu. per acre, down 3.1% from 2025 but 3.3% above the three-year average.

District 4: 189.73 bu. per acre, down 8.5% from last year and 0.5% below the three-year average.

District 7: 190.59 bu. per acre, down 2.3% from last year and essentially equal to the three-year average.

Those results are not disastrous. In fact, portions of Iowa remain respectable relative to longer-term averages. But the important theme is becoming consistent: 2026 corn is repeatedly failing to match the exceptional productivity implied by last year’s crop.

Full Iowa results will be particularly important Thursday because the eastern portion of the state has experienced some of this season’s most extreme thunderstorms, wind events and excessive rainfall.

Soybeans: bullish, but the Crop Tour signal is more nuanced. Soybeans are participating in the rally, but the Tour evidence is considerably less threatening than it is for corn.

Illinois scouts counted about 1,431 pods per 3-by-3-foot square, roughly 3.3% below last year but almost 3% above the three-year average. Western Iowa showed the same basic pattern: pod counts were generally lower than last year’s unusually strong readings but remained above three-year averages in all three districts sampled Wednesday.

Iowa District 1 pods were 8% above the three-year average, District 4 was 1.9% above and District 7 was 14% above its longer-term average. That does not make the Tour results bearish for soybeans, but it does mean soybeans need more help from other parts of the balance sheet than corn does.

China is providing some of that help. USDA has reported a series of Chinese purchases of U.S. soybeans during July and August, including flash sales on Aug. 3, 4, 6, 7, 11, 12, 13 and 14. The steady buying is increasingly important because the market is entering the period when U.S. export competitiveness normally improves and Chinese demand begins shifting toward newly harvested U.S. supplies.

Soybeans therefore have three sources of support: respectable Chinese demand, uncertainty over final U.S. yields and strength in soybean oil.

Soyoil gets help from $85-plus crude. September soybean oil’s rise to 70.57 cents deserves attention. Crude oil prices remain sharply elevated amid the renewed U.S./Iran confrontation, with WTI trading in the upper-$80 area early Thursday. Higher petroleum prices improve the relative economics of renewable diesel and biodiesel feedstocks, helping support soybean oil even when underlying soybean supplies appear adequate. That creates a useful dynamic for soybeans: oil is contributing more value to the crush, reducing the burden on soybean meal to support processing margins.

Wheat’s rally is becoming a physical-supply story. Wheat’s move deserves to be treated differently from the Crop Tour rally in corn. December Chicago wheat has moved back above $7.00, while Kansas City HRW is nearing $7.80. Increasingly, this is not merely a speculative geopolitical premium. It is becoming a physical logistics problem.

Reuters reported Thursday that attacks by Russia and Ukraine on Black Sea ports and vessels have shuttered terminals and delayed or canceled cargoes during the region’s peak export season. Chicago wheat futures have now risen more than 17% since early July, while buyers are investigating replacement supplies from North America, Australia and Argentina.

The implications extend beyond wheat. Russian attacks have severely curtailed grain flows from Ukraine’s Greater Odesa ports, while vessels near Russia’s Novorossiysk and Tuapse ports have also been attacked. The important change is that importers increasingly must ask not simply what Black Sea grain costs, but whether contracted grain can actually be loaded and delivered. That can redirect business toward the U.S.

Wheat therefore has the strongest independent bullish story in the grain complex and could provide spillover support to corn if international feed buyers begin substituting among grains.

The dollar is adding fuel. Another supportive element Thursday is the U.S. dollar. The dollar fell to roughly a three-month low after the Treasury Department announced plans to substantially expand purchases of long-dated Treasury securities. Reuters reported the dollar index near 98.56 Thursday morning. A weaker dollar does not guarantee additional grain exports, but it makes U.S. commodities more competitive in world markets at precisely the moment when importers are searching for alternatives to disrupted Black Sea supplies. That combination is favorable for wheat first, corn second and soybeans as Chinese demand expands.

Bottom line: The overnight rally is increasingly being built on multiple pillars rather than one weather headline.

For corn, the immediate catalyst is the growing discrepancy between USDA’s relatively optimistic yield assumptions and what Crop Tour scouts are finding. Illinois is the most important evidence yet. The Tour does not say Illinois will yield 184 bushels per acre, but a 7.7% year-over-year decline in the Tour calculation versus USDA’s assumed 0.9% decline is difficult for the market to dismiss.

Soybeans have a less dramatic production story, because pod counts remain respectable relative to longer-term averages. But continuing Chinese purchases, a weaker dollar and strong soybean oil are preventing traders from leaning aggressively bearish.

Wheat has an entirely different catalyst: Black Sea risk has crossed from headline risk into physical shipping disruption, increasing the possibility that world buyers will have to replace Russian and Ukrainian cargoes with more expensive supplies elsewhere.

The result is a grain market whose narrative has changed substantially in little more than a week. Corn has moved above $5.00. Soybeans are approaching $12.50. Chicago wheat is back above $7.00.

The next question is whether Thursday’s full Iowa Crop Tour results and Friday’s Pro Farmer production estimates confirm enough yield loss to turn what began as a short-covering rally into a more durable repricing of the 2026 U.S. grain balance sheets.

Market takeaway: The bulls no longer need to prove the crop is poor. They increasingly need only to prove that USDA has more bushels in its August balance sheet than farmers will actually harvest.
 

—Indonesia’s fuel mandate and El Niño are tightening the vegoil balance

Indonesia’s B50 mandate and El Niño fears tighten global vegetable oil supplies

Malaysian palm oil futures have pushed to around 4,965 ringgit per metric ton, the highest since December 2024, as the market increasingly treats Indonesia’s B50 biodiesel mandate not as a temporary demand boost but as a structural reduction in the amount of palm oil available to world importers. Weather risk, high petroleum prices and disruptions to Black Sea vegetable-oil trade are reinforcing that shift.

The key change is Indonesia. The world’s largest palm oil producer formally moved its mandatory biodiesel blend from B40 to B50 beginning July 1, with distribution being phased in and full availability at fuel stations targeted for Oct. 1. Indonesia’s Energy Ministry estimates the higher blend will raise crude palm oil use for biodiesel to roughly 16.3 million to 17 million metric tons annually, up from about 15.2 million tons.

That increase matters because it changes Indonesia’s role in the global vegetable oil market. In the past, higher production could readily spill into exports. Under B50, a larger portion of any production increase is effectively pre-committed to Indonesia’s domestic energy market.

The Indonesian Palm Oil Association has estimated the extra CPO requirement at roughly 1.7 million to 1.9 million tons, and has warned that sustaining B50 without reducing exports will eventually require production to rise substantially. Industry estimates put 2026 Indonesian CPO output near 53 million tons, but producers say annual output may ultimately need to reach 55 million to 60 million tons to accommodate B50 without squeezing other users.

That is why the rally is more important than the current Malaysian stock numbers suggest.

Malaysia, the No. 2 producer, is not experiencing an immediate physical shortage. July palm oil inventories actually increased 3.3% to 2.63 million tons, a five-month high, as production rose 9.4% from June to 1.79 million tons. Exports also increased sharply, by 14.5%, but not enough to prevent inventories from building.

Normally, rising stocks and stronger production would be a reason for futures to weaken. Instead, prices have broken to a 20-month high. That says the market is trading the forward balance sheet rather than the current one.

B50 is beginning to show up in USDA’s numbers. USDA’s August global oilseed outlook gives the bullish argument considerable weight. USDA cut its forecast for Indonesia’s 2026/27 palm oil exports by 450,000 tons to 23.7 million tons, explicitly citing higher domestic use. Indonesian domestic palm oil consumption is projected at 23.825 million tons, up from 23.225 million in 2025/26.

Globally, USDA now projects 2026/27 palm oil ending stocks at just 14.626 million tons, down nearly 5% from 15.382 million tons in 2025/26 and well below 16.990 million tons in 2022/23. Indonesia accounts for much of the tightening, with its projected stocks falling to 4.066 million tons.

The important point is that global production itself is not collapsing. USDA still forecasts world output of roughly 81.4 million tons. The tightening comes because consumption is approaching 80 million tons while Indonesia is redirecting more oil from the export market toward fuel.

That is a different kind of bull market. It does not require a catastrophic crop failure.

El Niño adds an asymmetric weather risk. Weather makes the balance more dangerous. Indonesia’s meteorological agency expects the country’s dry-season peak during July through September and has warned of increasing El Niño risk. A strong El Niño typically reduces rainfall across parts of Southeast Asia.

The timing of the production effect is important, however. Palm trees do not respond like corn or soybeans. Severe moisture stress can reduce fruit formation and yields with a lengthy lag.

Malaysian producer SD Guthrie says the current El Niño could have its biggest production impact in 2027 and 2028, because the effect of drought on palm yields may lag by 12 to 16 months. The company still expects its own 2026 production to remain relatively stable.

That means the immediate rally should not be interpreted as evidence that Southeast Asian production is already collapsing. Instead, the market is adding a weather premium to a balance sheet that B50 is already tightening.

There are also more immediate production problems. High diesel prices and fuel shortages have disrupted harvesting and transportation in parts of Sumatra, Sabah and Sarawak, with some producers cutting harvesting frequency.

$94 Brent makes the biofuel story even stronger. The energy market is amplifying the move. Brent crude climbed above $94 per barrel Thursday, its highest level in several weeks, as Middle East supply concerns intensified. That strengthens the economic and political case for Indonesia to maximize domestic biodiesel consumption. B50 is ultimately a mandate rather than a discretionary blending decision, but expensive petroleum makes the policy considerably easier for Jakarta to defend.

In other words, palm oil now has a direct demand link to a crude-oil market carrying a substantial geopolitical premium.

Black Sea disruption helps — but there is an important caveat. Disruption to Russian and Ukrainian sunflower oil shipments is tightening the broader vegetable-oil complex. India, one of the world’s largest edible-oil importers, is seeing sunflower-oil imports decline sharply as Black Sea supplies become less dependable. But not all that demand is flowing to palm oil.

Reuters reports India is on track for record August soybean oil imports of about 620,000 tons, as soyoil has become increasingly competitive. The premium of soyoil over palm oil has narrowed from more than $100 per ton to roughly $50, encouraging Indian refiners to substitute soyoil for sunflower oil. That is probably the most important restraint on the palm rally. Palm oil cannot indefinitely rise relative to soybean oil without destroying some import demand.

Market outlook: 5,000 ringgit is now the pivot. At roughly 4,965-ringgit, palm oil is essentially testing the psychologically important 5,000-ringgit level. SD Guthrie has said prices could reach 5,200 ringgit per ton by the first quarter of 2027. That target is now less than 5% above current prices, meaning part of the anticipated B50 and El Niño tightening has already been priced into futures.

The bullish case therefore increasingly depends on confirmation: Indonesian exports need to slow as B50 reaches full implementation, Malaysian inventories need to stop building, or El Niño needs to begin producing clearer evidence of yield stress.

If those occur together, 5,000 ringgit may become a floor rather than a ceiling.If Malaysia continues producing strongly and importers aggressively substitute soybean oil, however, palm oil could struggle to sustain a move much beyond current levels.

The broader agricultural market implication is bullish for the entire vegetable oil complex. Indonesia is effectively removing part of the world’s largest vegetable-oil supply from the export market and burning it domestically as fuel. Add El Niño risk and uncertain Black Sea sunflower-oil availability, and the result is a higher structural price floor not only for palm oil, but potentially for soybean oil and canola oil as buyers compete for whatever vegetable oil remains cheapest.

The significance of the move to nearly 5,000 ringgit, therefore, is less the price itself than what the market is signaling: the global vegetable-oil cushion is getting thinner just as government biofuel policies are making demand increasingly difficult to ration.

—Sugar rally signals a weather market as ‘Super El Niño’ threatens supply

India import talk, Brazil delays and fund buying tighten the global outlook

The world sugar market has abruptly shifted from complacency about ample supplies to concern that a strengthening El Niño could turn several regional production problems into a meaningful global deficit. New York October raw sugar settled Tuesday at 17.47 cents per pound, its highest level since April 2025, after gaining 2.81 cents since July 31. That amounts to a rally of roughly 19% in less than three weeks — and the speed of the move is almost as important as the price level itself.

The market now has something it lacked earlier this summer: multiple supply threats occurring at the same time. India is confronting tight domestic supplies and deteriorating crop prospects; Thailand faces both weather and structural production problems; Brazil’s Center-South harvest is being slowed by excessive moisture; and speculative funds that had been positioned for plentiful sugar have rapidly reversed course. Meanwhile, the U.S. Climate Prediction Center has raised the probability of a very strong El Niño during the Northern Hemisphere fall and winter above 90%.

India is arguably the most important bullish development. New Delhi is considering limited duty-free sugar imports—potentially as much as 1 million metric tons by the end of October—as wholesale prices in Kolhapur have risen nearly 20% since the beginning of August to a record 5,350 rupees per 100 kilograms. Officials are also considering tighter stockholding rules, changes in domestic sales quotas and possibly reducing the amount of cane diverted to ethanol. India importing sugar would represent a major reversal for a country that until recently was an important supplier to the world market.

That reversal matters beyond the tonnage involved. When a former exporter becomes an importer, the global balance is hit twice: export availability disappears while new import demand enters the market. India exported an average 6.8 million metric tons annually over the five seasons through 2022-23, but Reuters reported in June that output could fall to around 27.9 million tons against domestic consumption of roughly 28.5 million.

El Niño increases that risk. India expects its 2026 monsoon to produce the lowest rainfall in 11 years, with June-through-September precipitation estimated near 90% of normal. Even a moderate El Niño could cut Indian sugar production by around 1 million metric tons, according to Hedgepoint. A very strong event would increase the danger of further yield losses if rainfall remains deficient in Maharashtra and Uttar Pradesh.

Thailand is the second major vulnerability. The country is the world’s No. 2 sugar exporter behind Brazil, meaning relatively modest production losses can have an outsized impact on internationally available supplies. USDA’s Foreign Agricultural Service was already projecting Thai sugar exports to fall 14% in 2026/27, citing lower production, higher cultivation costs and pressure on cane acreage. El Niño-related dryness would add another layer of risk to that outlook.

Brazil is more complicated — and analysts say that distinction is crucial for judging how far the rally can run. El Niño usually produces more rainfall across Brazil’s principal Center-South sugar belt, which can interrupt harvesting, lower recoverable sugar content and force mills to leave mature cane standing. That is bullish for the crop being harvested now. But the same moisture can improve cane growth and yield potential for the following crop. Reuters notes that this is why some analysts remain reluctant to declare a long-lasting El Niño-driven bull market: Brazil accounts for roughly half of global sugar exports, and better Brazilian yields in 2027 could eventually offset losses elsewhere.

That creates an unusual market structure: El Niño may be bullish for nearby sugar futures but less clearly bullish for later 2027 supplies. If rain continues interfering with the 2026 Center-South crush through September and October, the market must ration limited near-term export supplies. But if the same rainfall produces a large Brazilian crop next year, the bullish window could eventually close.

The speculative response has already been dramatic. CFTC data show managed-money traders held 214,826 Sugar No. 11 futures contracts long and 171,242 short as of Aug. 11. During just the preceding week, managed-money longs increased by 27,461 contracts while shorts plunged by 103,311—a net bullish swing of about 130,800 contracts. That confirms that this rally is not merely a slow adjustment to crop forecasts; it has become a major repositioning event.

The other side of that trade is equally revealing. Producers and merchants increased their short positions by more than 82,000 contracts during the same week, indicating mills are aggressively using the rally to hedge future sugar sales. That commercial selling can slow price gains, but it also establishes the conditions for additional volatility if weather deteriorates enough to make producers uncomfortable with the size of those hedges.

The risk of a short-covering feedback loop should therefore not be dismissed. The market spent much of the past year below 15 cents because traders assumed Brazil could supply enough sugar to offset weakness elsewhere. Once that assumption began to break down, funds were forced to buy back shorts. If prices break convincingly through 18 cents and India confirms a large import program, the next psychological target becomes 20 cents per pound. Above that level, bullish forecasts cited by Globo Rural — 22 cents by October and possibly 25 cents later — would no longer look particularly extreme.

There is also an important sugar-versus-ethanol battle developing inside Brazil. Higher sugar prices encourage mills to direct more cane toward crystallized sugar. But stronger ethanol prices and Brazil’s biofuel policies pull cane juice in the opposite direction. Mills therefore have considerable flexibility to respond to relative margins, meaning the sugar market cannot simply assume every additional ton of cane becomes sugar. In a weather-shortened harvesting season, that flexibility becomes especially important because refiners and ethanol producers are effectively competing for fewer usable tonnes of cane.

For the United States, however, the immediate implications are more muted than the global headlines might suggest. USDA raised projected 2026/27 U.S. sugar supplies to 14.436 million short tons, raw value, with ending stocks forecast at 1.865 million tons and a stocks-to-use ratio of 14.8%. Imports from Mexico are projected at about 1.346 million short tons. Those numbers indicate that the U.S. market currently has a meaningful domestic supply cushion.

That means a 20-cent world sugar market would not necessarily translate one-for-one into U.S. sugar prices, which operate within a domestic support and import-quota system. Still, a sustained world rally would eventually raise replacement costs for refiners and food manufacturers, reduce the advantage of sourcing certain imported sugars and potentially increase pressure for additional import access if U.S. supplies tighten later in the marketing year.

There could also be an indirect benefit for corn sweeteners. If global sugar prices remain elevated, high-fructose corn syrup becomes somewhat more competitive for beverage and processed-food users where substitution is technically possible. That is unlikely to materially change U.S. corn demand by itself, but a prolonged sugar bull market would modestly improve the economics of corn-derived sweeteners.

The larger macroeconomic issue is food inflation. Sugar is used across confectionery, beverages, bakery products and processed foods, meaning higher raw prices work through supply chains gradually rather than appearing immediately at retail. The concern becomes greater if El Niño simultaneously raises prices for other tropical commodities. Reuters reports that the developing event is also threatening coffee, cocoa and several Southeast Asian crops.

Bottom line: Sugar has moved beyond trading forecasts of a future deficit and has begun pricing an actual weather threat. India is the key near-term trigger, Thailand adds another supply vulnerability and Brazil’s delayed harvest limits the world’s ability to compensate quickly. At the same time, Brazil remains the reason not to extrapolate the rally indefinitely: El Niño rainfall that damages the current harvest could improve the 2027 crop.

For now, however, the burden of proof has shifted. Below 15 cents, bears could argue the world had more than enough sugar. Near 17.50 cents, the market is asking whether supplies will be adequate at all. If India formally enters the world market as a sizable importer and Center-South Brazil loses additional harvest days as rains return, 20 cents becomes a realistic target rather than merely a speculative one.

—Agriculture markets yesterday:

■  WEATHER

— NWS outlook: The day’s biggest story sits squarely in the eastern Corn Belt: WPC has a Moderate Risk of excessive rainfall over central Indiana and Ohio, extending into far eastern Illinois, as organized heavy rain and flash-flooding threats spread from the Ohio and Tennessee Valleys toward the Mid-Atlantic coast, where a Slight Risk covers the I-95 corridor from Baltimore to New York. The driver is a sharp boundary between cool Canadian air pressing into the Great Lakes and Midwest and stubborn, record-challenging heat across the South — a convergence corridor that keeps funneling rounds of storms along the frontal zone through Thursday. On the severe side, the main threat area runs from the upper Midwest into the central Plains, with large hail and isolated damaging winds possible from eastern Nebraska into Minnesota and Wisconsin this afternoon and evening. For ag interests, that means welcome but potentially excessive moisture across the eastern Corn Belt, hail exposure in Nebraska and the western belt, and continued Extreme Heat Warnings baking the southern Plains and Deep South, keeping stress on the Delta and southern crop areas with overnight lows only in the low 80s. Monsoon storms bring a flood risk to Arizona, and a tropical cyclone is developing well east-southeast of Hawaii.

 

— Corn belt flooding gives way to cooler, drier pattern
Flooding threatens local yields as cooler weather favors grain fill
 

Figure 1: a two-sided corn belt: where the rain became too much, and where it never came

FIGURE 2HOW MUCH RAIN, AND WHERE

Blue bars were on the books by Aug. 15 – cumulative storm totals for Indiana and Ohio, and the overnight Aug. 14-15 round in eastern Iowa and northwestern Illinois. Orange bars are the latest round, Aug. 19-20.

Figure 3: the crop that walked into the flood

Condition ratings from the last USDA read before the storms. The spread between Iowa and the flooded east is the spread the Pro Farmer Crop Tour and subsequent USDA estimates have to reconcile.

Table 1:the two-sided yield ledger
 

The waterlogging findings in the left column — that yield losses become substantially more likely once flooding persists beyond several days, and that soybeans are more sensitive to excess water during reproductive development than during vegetative growth —are attributed in the article to University of Minnesota research summaries.

Figure 4 : what happens next, and when

The pattern change in sequence, ending with the one forecast that still points the other way.

Table 2:THE SOUTHERN PLAINS disagreement, side by side
 

Source: NOAA Climate Prediction Center outlooks issued Wednesday afternoon versus the newest overnight model guidance described in the article. The models are newer, which makes the wetter solution a trend rather than an established forecast.

WEATHER & MARKET SCORECARD: damage done, pattern turns friendly

■  REFERENCE LINKS TO KEY TOPICS

Index to links of special reports & other items of note