Quarterly Outlook
Q4 Outlook for Investors: Diversify like it’s 2025 – don’t fall for déjà vu
Jacob Falkencrone
Global Head of Investment Strategy
Head of Commodity Strategy
The USDA estimated corn inventories at 1.532 billion bushels, around 15% above trade expectations, though still down sharply from 1.763 billion a year earlier. This larger-than-expected carryout reflects weaker feed demand and firm production, leaving the market facing a more comfortable balance sheet than previously assumed.
Chicago December corn futures quickly adjusted, dropping 1.8% to a one-month low of USD 4.13 per bushel, extending a year-to-date decline from an average of USD 4.40. Harvest progress is moving ahead smoothly thanks to warm and dry weather across the grain belt, and forecasts call for more of the same. Ample supply pressure is therefore likely to dominate near-term price action.
Still, corn retains some support from healthy export flows and nagging uncertainty about final yields. Weekly export inspections remain firm, and with U.S. prices competitive, demand from Mexico and other buyers may continue. The market will weigh this against the bearish overhang from higher stocks.
Soybean inventories were pegged at 316 million bushels, slightly below consensus at 324 million. The supportive number failed to lift sentiment, however, with November futures sliding 1.6% back below USD 10/bushel, a level that has acted as a pivot throughout the year. Prices have averaged USD 10.29 but remain weighed down by lack of Chinese demand.
China normally accounts for more than 50% of U.S. soybean exports, yet ongoing trade friction has seen importers shift purchases toward Brazil and Argentina. The U.S. is therefore struggling to find buyers, even as harvest accelerates.
Within the soy complex, performance has diverged. Soybean oil is supported by demand from food and biofuels, linking its fortunes to the broader energy market. Soybean meal, on the other hand, remains pressured by weak livestock margins. Soybean meal futures in Chicago have slumped to a nine-year low at USD 271.5 per short ton, weakening the soybean crush margin to near a four‑month low. The crush in soybeans is comparable to the crack spread in crude oil, representing the margin processors or refiners earn by separating soybeans into meal and oil, or crude oil into gasoline and diesel.
In the latest reporting week to 23 September, the weekly Commitment of Traders report showed that managed money accounts held net short positions across all six major CME‑traded grain and oilseed contracts for the first time in 20 months. The combined net short was also the largest ever recorded for this period. This highlights a market where speculators currently view the path of least resistance as lower, reinforced by the steep contango structure across key crops. In such an environment, short sellers can profit even if outright prices remain unchanged.
Contango refers to a forward curve where near‑month contracts trade below deferred contracts. This typically reflects ample nearby supply, while deferred contracts trade higher due to the cost of storage, insurance, financing and expectations about future harvests. At present, one‑year forward prices for wheat, corn and soybeans are trading 14.9%, 10.5% and 5.2% above nearby contracts, respectively. In practical terms, this means a trader holding a short position would earn roughly those percentages over 12 months if spot prices are unchanged.
The U.S. grain market enters the 2025/26 marketing year on the back foot. Stocks data point to more comfortable supply than traders anticipated, while harvest progress continues unimpeded by weather. Corn and wheat are bearing the brunt of the selling, while soybeans remain caught between weak export demand and relative resilience in soybean oil.
Attention will now turn to the next World Agriculture Supply Demand Estimates report (WASDE) due on 9 October, the final weeks of U.S. harvest, and the unfolding South American planting season. Global trade flows and policy developments—particularly in China and Russia—will act as potential catalysts.
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