Limited Grains Upside Despite Growing Global Conflict

Insight Focus

Forward View

• Initial price spikes in soybeans and corn following the US strikes on Iran were short‑lived, with soybeans constrained by deteriorating US–China relations and corn tempered by ample global supply despite higher crude and fertilizer costs.

• Rising oil and fertilizer prices introduced risk‑premium buying and elevated production costs, creating caution rather than sustained bullish momentum across grain markets.

• Wheat—and to a lesser extent barley—faces potential upside if Middle Eastern tensions escalate, as energy and logistics disruptions could lift prices; diplomatic calming would limit market impact.

Soybeans

Global soybean markets have experienced a volatile month shaped by shifting US–China trade dynamics, record South American supply, and evolving US domestic policy pressures.

In early February, US–China relations dominated sentiment following President Trump’s announcement that China was considering raising purchases to 20 million tonnes—well above the previously fulfilled 12 million‑tonne commitment.

However, scepticism persisted, as Chinese buyers remained focused on cheaper Brazilian supplies, and state reserve storage capacity appeared limited.

Meanwhile, the US Supreme Court’s February 20 ruling overturning fentanyl‑linked tariffs disrupted the tariff landscape, weakening US negotiating leverage and raising uncertainty over China’s additional purchases.

Market prices reacted accordingly: Chicago futures rallied following renewed buying signals but softened as Brazilian supply pressure grew.

Brazil is harvesting a projected record 180 million‑tonne crop, maintaining its competitive advantage and weighing on Chinese futures, which declined amid negative crushing margins and ample inventories.

Domestically, the US outlook shifted toward rising soybean crush demand driven by expanding biofuel mandates. USDA projections highlighted increased planted acreage for 2026/27 and a long‑term trend toward domestic use overtaking exports as the primary demand driver.

Globally, soybean stocks reached new highs on strong Brazilian and Paraguayan output, easing price pressures despite short‑term rallies linked to Chinese buying bursts. Recent trading data showed soybeans rising roughly 3–4% over the month, buoyed by post‑Lunar‑New‑Year Chinese demand.

Corn

Global corn markets spent the past month oscillating within a narrow range as ample global supply and supportive but limited weather risks shaped overall sentiment. In the US, corn prices were largely steady, with Chicago futures consistently expected to trade between USD 4.30–4.50/bushel through Q1 due to abundant availability and only marginally supportive factors such as winterkill concerns and firm soybean markets.

Stronger US export inspections, running nearly 50% above last year, and renewed Chinese activity in soybeans provided indirect support to corn early in the month, while expectations of lower US corn acreage for 2026/27 reinforced a mildly constructive long‑term outlook.

The USDA’s corn crop downgrade and steady progress in planting and harvest added modest upward pressure, though these supply adjustments were not large enough to shift the market from its overall balanced posture.

Wheat & Barley

Global wheat markets remained largely range‑bound over the past month, weighed down by ample global supply and only marginal adjustments in the latest USDA WASDE estimates. February’s report trimmed world ending stocks slightly to 277.51 million tonnes, leaving markets uninspired as healthy Northern Hemisphere crop conditions limited bullish momentum.

Fund positioning offered some support, as speculative shorts continued to ease across US and European markets, helping wheat crawl off contract lows.

Regionally, US wheat enjoyed a modest competitive edge due to EUR/USD currency movements, while Black Sea logistics remained strained by winter conditions and ongoing conflict.

Ukraine and Russia struggled to maintain export pace amid harsh weather and infrastructure pressures. Meanwhile, India approved new wheat export quotas, although pricing leaves its wheat largely uncompetitive.

Barley markets saw slightly firmer sentiment compared with last month, supported by demand from China and Saudi Arabia, and optimism surrounding seasonal beer consumption events such as the Winter Olympics and the upcoming World Cup.

Despite this, malting barley premiums remained under pressure as global beer demand underperformed, and 2025’s large global barley harvest continued to weigh on the market. Analysts expect 2026 production to fall by 10 million tonnes, tightening stocks and potentially supporting prices later in the year.