The Weekender

August’s spectacular rally finally ran into resistance as the calendar turned to September. Corn and beans made new highs before harvest and peace headlines created headwinds, wheat gave back a chunk of last week’s gains and soybean oil got a better-than-feared SRE outcome only to fall back below 70 cents by week’s end.

None of that changes the bigger picture, though.

Energy is back in the driver’s seat.

Diesel pushed to new highs as an already-tight global market met renewed Middle East fighting, Russian supply disruptions and a brief dose of Gulf Coast storm risk. At just over $4.70/gal, front-month ULSD futures pushed above the highs set after Russia’s invasion of Ukraine to reach a new all-time high Wednesday.

Crude was the big winner last week as U.S.-Iran fighting put Hormuz back in the spotlight. WTI jumped more than 5% Tuesday alone as renewed attacks raised concerns over Middle East supply, while shipping through the Strait remains at a snail’s pace. October futures closed higher every day, gaining roughly $8 on the week to finish up 9.7% near $91.50.

Worth noting: nearby crude remains well below the highs seen earlier this year, while diesel just made an all-time high—a clear illustration of how much of the current energy tightness is being driven by distillates as conflicts drag on in both Russia and the Middle East.

The bond market is flashing a warning sign. Persistent higher energy costs are feeding inflation worries just as swelling deficits and renewed rate-hike expectations pressure Treasuries. The 10-year has climbed ~60 basis points this year to nearly 4.8%, raising borrowing costs and tightening financial conditions.

After months of soybean oil stealing the show, meal just took the wheel.