Policy and macro drivers

U.S. biofuel policy uncertainty stayed a market overhang

Biofuel policy timing became a central macro variable for soybeans and the vegetable oil complex. Early in the week, reporting indicated the U.S. administration was unlikely to finalize 2026 blending quotas before year-end, extending uncertainty for contracting, hedging, and investment decisions. That theme was reinforced midweek when the EPA signaled it expects to finalize 2026 and 2027 biofuel blending mandates in the first quarter of 2026. The market implication was straightforward: without clarity on quotas, the “demand math” for soybean oil and broader feedstock demand stays harder to price, increasing sensitivity to daily headlines.

Trade-war context and farm policy messaging

On Friday, attention shifted to U.S. farm support policy, with commentary suggesting the USDA is unlikely to deliver a second aid package given budget constraints, even as the first package’s crop-specific rates were expected soon. The broader framing in the same coverage tied farmer stress to trade tensions and altered export flows—particularly the period when China avoided U.S. soybeans and the more recent resumption of U.S. oilseed sourcing tied to a stated pledge. This narrative mattered because it reinforced a “policy-to-flow” linkage: markets were not only trading fundamentals, but also the probability that policy actions would continue to reshape demand channels.

China’s soybean strategy: auctions, U.S. buying, and storage management

A defining thread through the week was China’s reserve-management approach alongside resumed U.S. buying. Reports highlighted stepped-up state reserve auctions, with multiple sales events and a further auction planned, framed against an apparent late-October trade understanding. Importantly, the coverage underscored that beans still faced an import tariff and were seen as unprofitable for private crushers—suggesting state-linked demand is doing more of the heavy lifting in the near term than purely commercial margins would imply. That structure supports volatility: auctions can ease internal tightness at one moment, while fresh import commitments can tighten forward availability at another.

Futures performance and daily price path

Wheat spent the week digesting exporter supply and mixed demand headlines, with March 2026 CBOT wheat settling $5.20 3/4 on Monday, sliding to $5.09 1/2 Tuesday, then $5.06 1/4 Wednesday, ticking up to $5.07 3/4 Thursday, and finishing at $5.09 3/4 on Friday. The week’s tone was consistently constrained by the “large supply” narrative, even as pockets of demand (tenders and South Korea buying) and Argentina crop updates provided intermittent support.

Corn’s daily settlements showed comparatively resilient structure. March 2026 CBOT corn closed $4.39 3/4 Monday, dipped to $4.36 1/2 Tuesday amid spillover wheat weakness and a sharp crude oil drop, then recovered to $4.40 1/2 Wednesday, pushed to $4.44 1/2 Thursday, and ended $4.43 3/4 Friday, with the week ending slightly higher. Corn’s price action repeatedly found support in demand-side evidence—exports, private sales, and especially record ethanol grind.

Soybeans were the clearest laggard in the complex. January 2026 CBOT soybeans settled $10.71 3/4 on Monday, slipped to $10.62 3/4 Tuesday, then $10.58 1/4 Wednesday, $10.52 1/4 Thursday, and $10.49 1/4 Friday. The weekly drift lower aligned with two persistent pressures: uncertainty around forward biofuel mandates (and what that implies for veg-oil demand), plus evidence that China’s buying and inventory management remains highly tactical, influencing both headline risk and the shape of near-term demand.

Global supply, exports, and major-origin developments

Wheat: Black Sea logistics risk, South America competitiveness, and evolving outlooks

Wheat headlines consistently pointed to global supply depth, but with meaningful regional nuance. Ukraine’s export flow risk re-emerged as a logistical constraint after reports that attacks reduced terminal grain intake and forced some shutdowns, implying higher uncertainty around near-term shipments even if harvest size and policy do not mandate restrictions. Kazakhstan also reported higher new-crop grain exports and a sizable seasonal export potential, reinforcing the idea that regional supply is present even if routes and risks differ.

South America added a competitively priced supply story. China’s purchase of an Argentine wheat cargo—described as the first in decades—was tied to a record crop environment and tariff reductions that improved export competitiveness, even as quality (protein) was flagged as a potential limiter on realized pricing. Into Friday, Argentina’s wheat crop estimate was revised higher by the Buenos Aires Grain Exchange, further anchoring the “ample global wheat” narrative.

In the background, forward-looking production estimates for 2026/27 also shaped longer-horizon expectations: an estimate for the EU soft wheat crop suggested a decline year-on-year, while a Russia wheat crop forecast was kept steady but below the prior year. Canada’s wheat production was also revised higher, supported by late-season conditions and updated area/yield modeling, adding another counterweight to bullish wheat narratives.

Europe delivered its own structural signals. France’s ministry projected 2026 soft wheat acreage at 4.56 million hectares, and EU soft wheat exports were reported behind the prior-year pace over the relevant window—useful context for interpreting why Europe can oscillate between “tightness talk” and “competitiveness talk,” depending on what the world market is offering at any given time.

Corn: demand remained the anchor, with Brazil sizing also in focus

Corn’s weekly narrative leaned demand-supportive. A major highlight was U.S. ethanol: data pointed to another record ethanol corn grind for the week ending December 12, paired with a draw in ethanol stocks and stronger exports/refiner inputs—evidence the demand engine was still running at a pace that can cushion futures on pullbacks. Weekly export sales and commitments also reinforced the demand story, described as a record buying pace relative to the prior year comparison.

South America remained relevant for forward balance sheets. Brazil’s corn production expectations were revised slightly lower in one estimate late in the week, with both first- and second-crop figures trimmed—an incremental change, but one that matters given Brazil’s role in export seasonality and global availability when U.S. export momentum is already strong.

Soybeans: U.S. exports lagging, South America dominance, and crush dynamics

Soybeans were shaped by the interaction of demand timing, policy, and the global export hierarchy. Early-week analysis emphasized Brazil’s projected dominance—record shipments and production assumptions—and framed U.S. exports as lower year-on-year due to South American competition and trade frictions. Argentina’s export tax cuts for soybeans and by-products were also flagged as a policy lever worth watching, as it can influence farmer selling incentives and crushing/export economics.

On the U.S. side, the crush story landed with the NOPA report: November crush was reported at 216.04 million bushels, down from October’s record but still a record for November, while soybean oil stocks rose sharply. This matters because it links directly back to biofuel-policy uncertainty: when the market is unsure about future mandate levels, the valuation of oil—and the crush margin—can swing rapidly even if meal demand is steadier.

Weather and crop conditions

Weather was a constant “second screen” for the market all week, particularly where it could shift yield expectations or logistics constraints.

In South America, the early-week outlook included heavy rainfall risk across parts of central Brazil, with totals of 150–200mm over 10 days cited as raising flooding risk—supportive for soil moisture but potentially disruptive for fieldwork and localized crop stress if excess persists. In parallel, Argentina was repeatedly flagged for a hotter and drier trend that could become detrimental for corn and soybeans, with broader monitoring themes focused on how quickly soil reserves could be depleted during an early-season dryness window. Later in the week, analysis emphasized that La Niña conditions were forecast to persist into early next year—an important risk factor historically associated with hotter/drier Pampas outcomes—while also noting that current soil moisture offered some buffer if dryness intensifies.

In the U.S., winter wheat moved deeper into dormancy with near-term winterkill risk described as low, but with meaningful caveats: dryness risk remained “well in play,” and soil moisture was highlighted as hovering near multi-year lows in key SRW states, while HRW areas held healthier moisture. The market relevance was less about immediate yield loss and more about the setup for spring—whether wheat exits dormancy with enough subsoil support to withstand a volatile spring precipitation pattern.

Elsewhere, the Black Sea carried a recurring dryness angle, with conditions characterized as warm and dry and unfavorable for winter wheat going into/through dormancy despite some precipitation events. That backdrop matters because Russia/Ukraine are not only huge suppliers, but also shape global pricing psychology: weather risk there can change the tone of world values quickly, even when the near-term pipeline feels “well supplied.”

Logistics and flows: the “how it moves” factor returned

Late in the week, the U.S. river system took on a higher profile. USDA’s transportation update showed Mississippi River barge shipments rising to 888k tons week-on-week, with corn shipments up 82.1% and soybeans up 41.8%, while barge rates in St. Louis increased. At the same time, extreme cold and ice were described as complicating barge operations and contributing to constraints and low-water concerns—an important reminder that even with adequate supply, the market can briefly re-price basis and spreads when logistics friction appears.

Positioning and market structure signals

Spec positioning updates—though partially delayed/backlogged—added texture to how the market interpreted daily headlines. Wheat maintained a heavy net-short profile in managed money measures, corn showed signs of long-side adjustments as the week progressed, and soybeans saw notable reductions in net-long exposure by early-December reporting windows. In practical trading terms, that mix tends to produce asymmetry: wheat can rally quickly on surprise bullish catalysts (short covering), while soybeans can struggle to sustain rallies if policy uncertainty reduces conviction and funds continue trimming exposure.

Takeaways heading into the next week

The week closed with wheat still wrestling the weight of global supply and mixed regional stories, corn supported by demand evidence and ethanol strength, and soybeans pressured by a combination of policy uncertainty and China-driven flow management. The next phase will likely hinge on whether U.S. biofuel mandate clarity becomes more concrete as Q1 approaches, whether South American weather begins to “trend problem” rather than “trend watch,” and how logistics and export pace evolve as winter conditions test the North American transport network.