Agriculture: grains and livestock gains offset softs slump

Grains: Soybean oil leads the complex as wheat tries to build a base

Grain markets digested the latest WASDE report with a mixed response. Soybeans advanced, corn held broadly steady and wheat softened as traders assessed updated projections for U.S. and global stockpiles at the end of the 2026–27 season. Despite raising its estimate for Brazil’s soybean production to 180 million metric tons, up from 178 million and above average analyst expectations, soybeans rose as the USDA left its U.S. export forecast unchanged while noting that China could step up purchases of U.S. beans despite intense competition from Brazil’s record crop and lower export prices.

Corn futures were little changed as an abundance of global supplies continue to anchor prices. Wheat futures, meanwhile, softened after the USDA unexpectedly raised its forecast for U.S. 2025/26 wheat ending stocks, citing weaker demand from domestic flour millers. Although global wheat stocks declined for the first time in seven months from a four-year high, overall availability remains comfortable, limiting upside momentum.

In recent months, soybeans have been one of the brighter spots, briefly pushing to a two-month high as traders reacted to comments from President Trump suggesting China would buy more U.S. soybeans in the coming months. The rally, however, faded as the market refocused on fundamentals. From a purely economic perspective, the scope for sustained Chinese demand for U.S.-origin beans remains limited, with Brazil’s peak export season offering significantly cheaper supplies.

As a result, soybeans continue to trade as one of the most headline-sensitive agricultural markets, with China acting as the marginal buyer. Political signals can still trigger short-term price moves, but the structural trend points toward Brazil retaining a larger share of global exports. The Chicago futures contract has recovered from a USD 9.36 per bushel low in 2024, but prices remain range-bound, struggling to break decisively out of the USD 10.50–11.50 per bushel area.

Within the soy complex, soybean oil has clearly emerged as the standout performer, gaining around 18% so far this year and increasingly decoupling from beans (+7.6%) and meal (+1%). The strength reflects a structural shift in demand linked to the energy transition with bean oil becoming a strategic energy input rather than a purely food-related commodity. Higher biofuel blending mandates for 2026–27 have effectively placed a floor under domestic consumption, while new renewable diesel capacity that came online in late 2025 continues to absorb growing volumes of feedstock.

This strength has been amplified by tighter global vegetable oil supplies, as palm oil production in Southeast Asia has plateaued and rapeseed output in Europe and Ukraine has disappointed. With demand for soybean meal constrained by a historically small U.S. cattle herd, the oil share of the soybean crush has risen to multi-year highs, leaving soy oil to carry an increasing share of the bean’s overall value and firmly establishing it as the energy-driven pillar of the soy complex.

Corn: ample supply keeps a lid on prices

Corn has lagged other grains, reflecting a comparatively comfortable global supply outlook. Strong production in recent seasons, coupled with less acute weather risk than wheat and weaker demand growth relative to soybeans, has kept corn prices under pressure. Some focus on the recent rise in oil prices given the bio-fuel link to not only corn, but also soybeans. The H2-2026 rebound in the Chicago corn future from a USD 3.69 per bushel low has since stalled with the current price around USD 4.30 reflecting a small loss on the year. 

Wheat: building a base with focus on weather risks

Wheat prices, range-bound for the past two years, have recently benefited from a softer dollar supporting export competitiveness, while weather risks in key Northern Hemisphere producers and ongoing Black Sea tensions have preserved a modest risk premium.

Despite the USDA’s first reduction in global stocks in seven months, overall supplies remain ample and the market continues to react sharply to regional disruptions. The Chicago futures contract has repeatedly found support near USD 5 per bushel, but a pattern of lower highs since 2024 signals a market still struggling to build sustained upside momentum.

Soft commodities: From scarcity shock to reassessment

Cocoa has been the single largest detractor from agriculture performance this year. After last year’s historic rally—driven by severe production shortfalls in West Africa—the market has entered a violent correction phase as prices begin to reflect a potential supply response and demand rationing.

The narrative has shifted from outright scarcity to cautious optimism that higher prices will eventually incentivize increased production and investment, even if structural challenges such as disease, aging trees, and climate vulnerability persist. The recent weakness has occurred despite cocoa’s inclusion in the Bloomberg Commodity Index this year, which reintroduced systematic investment flows into a market that is relatively illiquid and prone to sharp price swings.

While cocoa remains fundamentally tight in the near term, the extreme price levels seen earlier have made demand elasticity a central concern. After trading above USD 10,000 per tonne a year ago, prices have since collapsed toward the USD 4,000 area, illustrating how quickly sentiment can reverse once the market begins to price in a supply response and demand rationing.

Coffee: improving Brazilian outlook weighs on prices

Arabica coffee has also come under pronounced pressure. After being a top-five performer last year, prices are down around 14% this year, weighed down by the prospect of a record production in Brazil, the world's top supplier. Brazil’s 2026 coffee production is now seen at a record 66 million bags, according to the country’s national supply agency Conab, reinforcing expectations of improved availability.

Recently, prices have slumped to a six-month low near USD 3 per pound, a 32% decline since October when the Arabica futures traded near a record high around USD 4.38 per pound, highlighting how quickly sentiment has turned. Much like cocoa, elevated prices last year encouraged producers to expand acreage and invest in renovating older crops, laying the groundwork for a supply response. While coffee remains vulnerable to renewed weather stress, particularly in Brazil, the balance of risks has for now shifted toward greater availability, prompting a reassessment of the bullish narrative that dominated earlier.

Sugar: surplus expectations and demand sensitivity

Sugar prices have weakened as the market is weighed down by a global glut, and a big crop coming from top grower Brazil, potentially highlighting a prolonger period of lower prices. While market insiders expect another surplus in the 2026-27 season the emergence of a potential El Niño pattern may offer some downside risks to production in Asia during the 2026-27 season. The New York traded sugar futures contract has halved in value since 2023 when it briefly rose above 28 cents per pound before beginning a year-long slump that has taken it down to trade near 14 cents per pound, a level that has offered support on a couple of occasions since November.  

Livestock: A different cycle, continued resilience

In contrast to crops and softs, livestock markets have continued to perform well, supported by what can best be described as a near-perfect storm of low supply and resilient demand. Live cattle, feeder cattle, and lean hogs have all delivered positive returns, reflecting structural tightness following years of drought and high input costs that drove aggressive herd liquidation. The U.S. cattle herd is now at its lowest level in more than 75 years, a situation exacerbated recently by a major disease outbreak in Mexico that halted imports and removed hundreds of thousands of feeder cattle from the U.S. supply chain.

While the pork industry can expand production more quickly than beef, hog markets have also found support. Strong export demand, particularly from Mexico, combined with global supply constraints caused by outbreaks of PRRS and African swine fever in Europe and Asia, has helped keep the global balance tight.

A recent trade deal between the U.S. and Argentina will in the coming months lead to an influx of beef, however while it may bring down the costs to the consumer, the deal has reignited criticism from cattle ranchers and Republican lawmakers in farm states who were outraged last October when Trump first floated plans to increase imports of Argentine beef, threatening to lower the price that American ranchers receive for their cattle.

Speculator positioning: Overall short base except soybeans, coffee and livestock

The weekly Commitment of Traders (COT) report, released every Friday with data from the week ending the previous Tuesday, provides a breakdown of futures market open interest by trader category. In commodities, the focus is primarily on managed money, as these participants typically operate with tight risk limits and without underlying physical exposure, making them more reactive to changes in fundamental and technical price signals. As such, their positioning often provides useful insight into trend strength and the risk of potential reversals.

Current positioning shows how livestock stands out, with speculators holding an elevated net long valued close to USD 20 billion, reflecting strong price trends supported by tight supply fundamentals. In grains, positioning is more mixed across the soybean complex, while corn continues to be traded with a short bias. Notably, CBOT wheat has been held net short for a record 44 months, partly reflecting a persistently steep contango that makes it economically attractive to maintain and roll short positions even in the absence of sustained downside movements in prompt prices.