Iran Negotiations Pressure Oil, Grain & Soybean Markets

Added: 2026-05-26

[00:00:05]So close, but so far. Good morning. This is Arlon Sudterman, chief commodities economist at Stoneex, coming to you from the trading floor on this Tuesday, May the 26th.

[00:00:17]Negotiations with Iran continue. And throughout the weekend, we continue to hear from the Trump administration how close how close we are to a deal. Even hearing words like we're 95% there. And that may be true from the from looking at the bullet points of things that they want to negotiate, but that last 5% is significant. Now, in fairness, what they're talking about here is not a peace deal itself, as I would describe it, but rather a deal to have a ceasefire for 60 days while they continue to work on that 5%. But that 5% is a pretty significant distance or or chasm between the two sides. That 5% is largely about Iran being able to hang on to the enriched uranium that it's in possession of versus the United States wanting to see that enriched uranium either destroyed or removed from Iran or both. And it also wants to see the straight of Hormoose opened up with no control of Iran over traffic moving through it, let alone fees on ships passing through it. And those have been non-starters from Iran's point to this point as well. Iran really seems to feel like it's got the upper hand here. Or maybe it's just knows that its only way of survival is to delay, delay, delay, delay. believing that eventually domestic and international political pressure will become so much on President Trump that he'll give in and allow them survival. The Revolutionary Guard knows that if the United States were truly to move in and uh put troops on the ground that eventually uh they might be wiped out. And but if they can delay and faint negotiations and maybe even if necessary reach an agreement that then requires the United States to with withdraw its military forces but then not keep the agreement making it more difficult to re-engage those military forces once again. But the more they can delay and put pressure on the president to start giving in on some of these key points, that increases the possibility then that they can in the world's eyes recruit more followers and say we stood up to the United States and we want it matters not that um their military has been decimated. They still have the capability to um to block ships moving through the straight of Hormuz at this point and that would probably take ground troops in order to eliminate that at this point and they know it and they know the political pressure is on President Trump. But President Trump tries to to pass that off and say he's he's not in a hurry. He's got all kinds of time to negotiate. Um but that really kind of plays into Iran's hands as well.

[00:03:22]So we did see the commodity markets really break lower over the weekend and to start the new week uh after holiday short uh after an extended uh Memorial Day holiday in the US markets. We saw that sell off in crude oil that's pulled grain and oil seeds with it. the market trading as if we're going to have a peace treaty and that supplies of fertilizer and fuel so to speak will be restored right away. Even if we get a peace treaty signed today, even if the straight of moose were to open up today, which is extremely unlikely, I still predict that global supplies of fuel and fertilizer will get tighter before they get better over the months ahead. And um so the market seems to be discounting that risk at this point.

[00:04:17]Keep that in mind as you look at how these markets are trading. But money flow is driven to a great extent these days by the algorithms. The algorithms reading the headlines and then trading the momentum that follows. And that's what's driving things right now. A couple of other things to take note of today is our China desk continues to talk about adverse weather affecting their wheat crop, their winter wheat crop which is approaching harvest. uh the maturing fields on in the North China plane in particularly have been seeing some significant persistent rains. Now to some extent it mimics what we saw in 20123 when we had over 20 million metric tons of harvested wheat in China because of these persistent rains that was sprouting and therefore unusable for milling quality wheat and had to go into the feed stream displacing corn. At this point, the forecasters, our partners over at Commodity Weather Group are anticipating we're going to see a drying pattern over the next 1 to two weeks. Some rains could return again in the 11 to 15 day period. We'll have to watch that. But right now, it looks like a drying pattern that should reduce the risk somewhat. Right now, what we're hearing on the ground in China that perhaps this year's damage might be 8 to 10 million metric tonses of sprouted wheat. That's a prediction at this point based on the conditions they see that would be about six to seven to 7% of the total crop which is expected to be over 140 million metric tons. So it that's something manageable. All of this could play into though how much corn or wheat they may or may not buy as part of that $17 billion deal they agreed to on top of the soybeans they previously agreed to back in October. So we're going to be following that and kind of see as the harvest goes what the actual damage levels are. The higher the damage levels, the more likely we could see them use some of that 17 billion to buy wheat. uh the lower the damage perhaps more likely to buy more corn and so we'll be monitoring that. One of the things we'll also be watching is soybean purchases. This is the time of year when private crushers start locking in prices for the next marketing year. And typically that's US soybeans. At least historically it's been US soybeans uh starting September into January and then Brazilian new crop soybeans February on after that. They've purchased right now about a million and a half metric tons of Brazilian soybeans for delivery in September and October and about three million metric tons of new crop Brazil soybeans uh for early next in 2027.

[00:07:16]And so there's still plenty of room for more soybean sales right now. But keep in mind that this is shows that Brazilian soybeans are far cheaper than US soybeans even into next year. And so if there's going to be 25 million metric tons purchased, it's going to have to be by the state grain buyer sino grain to go into reserve. Oh, but the reserve is full. So that means they'll have to release it auction if they're going to buy it, displacing any purchases they may make from Brazil. But the bottom line is if they're going to do so, they need to start buying those soybeans soon to send that message to the private crushers that there may be cheaper soybeans coming out of the reserve that they purchase from United States. Now, they probably wouldn't pass just immediately pass through. It' be older beans coming out of the reserve that are displaced by the new soybeans from the United States coming in. That's what they basically did with the 12 million metric tons that they purchased for this current marketing year. Will they do 25 million metric tons? I remain a skeptic.

[00:08:22]I I I certainly remain a skeptic, but and they have kept their deal on the 12 million metric tons. So, we have to respect that possibility they may do so.

[00:08:34]So, we'll be monitoring that. That'll have a big impact in setting the tone for the soybean market as we go through the summer. We'll get crop progress and condition ratings here later today for this week. Uh USDA starts releasing crop condition ratings for the corn and soybean crops when those crops uh reach 50% emergence. So, we're approaching that level now. Then that'll really set the tone then how well are those crops doing. From a weather pattern standpoint, we're generally going to be warmer this week in much of the northern Midwest. And we're setting up a typical El Nino pattern right now with the storm track going further to the south, allowing the Midwest to dry out with warmer temperatures now. But longer term forecasters still anticipate that we're going to see a pretty mild overall summer um which will help ease any potential moisture threats if they develop if in fact forecasters and those models are correct. But we'll see. We'll stick with it and follow that and continue to provide those updates. Be sure to like and subscribe uh if you want to continue to receive these updates from the trading floor.