The Weekender

USDA gave the market something to trade besides war and weather. Corn and beans rallied hard Wednesday despite USDA finding another 1.4 million acres in each crop, as a lower corn yield, record product demand and a tightening global feed grain picture supported markets. Further deterioration in the Black Sea conflict kept wheat on edge, while continued Chinese buying and record crush kept a bid in beans.

Energy markets won’t let up. Diesel and gasoline pushed sharply higher again this week, while wars in both Iran and Ukraine continue to keep prices elevated. At this point, the bigger question is not when they come back down — it is how much more cost agriculture and consumers can absorb before something gives.

Diesel was the week's best performer by a wide margin, up 9.8% (+38c), boosted by a massive nearly 30c jump on Monday alone as global refinery disruptions, tight distillate inventories and escalating geopolitical supply risks triggered aggressive buying across energy futures. Wild to think nearby futures started the year barely above $2.00 — and front month is trading near $4.30 today.

Gasoline wasn’t far behind, up 6.7% (+20c) on the week and closing just shy of $3.20 Friday. Gasoline traded near $1.65 on the second trading day of the year and is now nearly 95% higher YTD.

The spread between diesel and gasoline continues to build, trading near the 2022 highs reached after Russia’s invasion of Ukraine. Back then, Russian distillates largely continued to flow — just to different buyers. This time, refinery outages are cutting production itself, meaning fewer barrels are making it to market at all.

Refinery margins are showing the squeeze. The diesel crack spread — the margin refiners make turning crude into diesel — has exploded higher alongside the rally. Normally, margins like these would encourage refiners to run hard, but outages, maintenance and operational constraints limit how quickly additional barrels can come online. The problem isn’t a lack of crude — it’s a lack of refining capacity and available distillate barrels.

The pain is showing up at the pump… again. The national average has now held above $4/gallon for four straight weeks, after spending 11 consecutive weeks above that mark from early April through mid-June. Outside of 2008 and 2022, Americans have never seen sustained $4 gasoline — making 2026 only the third such episode in EIA’s weekly history.

Gulf of Mexico first, Strait of Hormuz next? Trump told supporters Friday that Americans may need to accept higher gasoline prices — and joked he may eventually rename the strait U.S. territory.

A joke… maybe?

Regardless, energy prices don’t appear to be coming down anytime soon — and that spells trouble for the economy. Retail diesel is still above $5.25/gallon, roughly 50% higher than where it started the year. Diesel fuels the world, and when it stays elevated, those costs carry into everything else — dragging prices higher no matter what the stock market says.

Equities, meanwhile, seem largely unfazed. The S&P 500 notched its 27th record high of the year this week, still basking in the glow of the AI and tech boom even as diesel remains above $5/gallon. That disconnect can persist for a while, but sustained energy costs eventually show up somewhere — in margins, inflation or consumer spending.

$5.25+ retail diesel also matters for the soybean complex. Tight distillate supplies and elevated diesel prices improve renewable diesel production margins, keeping bean oil and other biofuel feedstocks competitive even beyond mandated demand — another direct link between energy inflation, crush margins and crop balance sheets.

For the U.S. farmer, $5+ diesel couldn’t come at a worse time. Fall is when fuel use peaks by a mile. While off-road diesel avoids state and federal highway taxes — cutting the cost by roughly 75¢ to $1.00/gallon versus retail — the spike is identical.

The Silver Lining — If You Can Call It That: The heat is helping crops dry down fast, which should cut propane demand for grain drying this fall. But trading dryer gas savings for $5 diesel is still a pretty brutal trade. The northern half of the Corn Belt gets some relief from the heat this week, while the southern half of the country keeps roasting.

Tyson is shrinking its beef footprint without meaningfully shrinking slaughter capacity. The company announced Thursday it is consolidating its beef business around Dakota City, Holcomb and Amarillo, while closing Joslin and Eagle Mountain and pursuing a sale of Pasco. Since late last year, Tyson has cut its primary beef slaughter footprint from six plants to three core facilities — shedding roughly 10,000 head/day of historical capacity in the process. But Tyson says overall slaughter capacity should remain roughly unchanged, with Amarillo adding back a second shift as cattle supplies allow. The issue is not capacity — it is cattle.

And there aren’t any signs the cattle are coming back. The U.S. beef cow herd remains near multi-decade lows, and even record cattle prices have yet to trigger a meaningful rebuild. Live cattle futures have retreated from their highs, but that doesn’t change the underlying problem: rebuilding the herd takes years — if it rebuilds at all.

The White House extended the Jones Act waiver another 90 days, to mid-November, but narrowed it in the process — the covered commodity list was cut by roughly two-thirds and voyages now need sign-off before they sail. Fertilizer and soybean oil both stayed on the list. The administration also announced tariffs of up to 100% on imported drones and components, and Indonesia will launch a Strategic Mineral and Commodity Exchange on January 1, 2027 to try to set its own reference prices for palm, nickel, tin, coal and coffee.

In a pretty incredible baseball moment, St. Louis Cardinals rookie Joshua Báez homered in each of his first three major-league at-bats yesterday at Wrigley Field, becoming the first player in modern MLB history to hit three home runs in his debut. Not a bad way to introduce yourself — especially in Chicago. The Cardinals won 8–4, which looked a whole lot better than the 10–2 beating the Cubs handed them in St. Louis on July 28 during AgriNext.

Wednesday’s August report was a bearish print, but markets didn’t seem to mind. USDA added 1.4 million acres, taking soybean area to 86.8 million, while trimming yield just 0.3 bpa to 52.7 — leaving production at a record 4.519 billion bushels. Yet the market’s reaction made it clear that traders are looking past the size of the crop and toward continued strength in demand.