“Even with ample stocks, geopolitics, energy, and climate keep grain market volatility high…”
Sol Arcidiacono is head of the grain sales desk for Latin America at HedgePoint Global Markets and has more than 20 years of experience in grain and commodity markets and risk management. She holds a degree in public accounting from Universidad Nacional de Rosario – UNR, Argentina, and a master’s degree in Financial Management from Universidad Politécnica de Cataluña/EAE in Barcelona, Spain. Previously, she worked at ED&F Man Capital Markets, Intagro, Innovagro, and Nidera.
Despite ample beginning stocks across major producing regions and agricultural commodities at the start of the 2026/27 crop season, grain markets are experiencing a year of high volatility. Geopolitics has been the main driver, affecting key agricultural variables such as logistics, freight rates, and fertilizer prices.
This environment also affects macroeconomic factors relevant to agricultural markets, including exchange rates, monetary policy in major economies, investment fund activity, and financing costs for farming and industry.
The conflict in the Middle East has significantly changed the market’s perception of risk. At the height of tensions between the United States, Israel, and Iran, oil prices doubled from their levels at the beginning of the year, accompanied by a sharp increase in volatility. Restrictions on navigation through the Strait of Hormuz, through which approximately 20% of global flows of oil and petroleum products pass, heightened uncertainty.
Direct U.S. intervention changed the scale of the conflict. In the final four months of the year, the war became more firmly embedded in market expectations, supporting higher commodity prices and keeping volatility elevated.
This environment also had repercussions for the war between Russia and Ukraine. Attacks on shipping routes and port facilities regained prominence during the Northern Hemisphere harvest, when larger wheat supplies were expected to reach Black Sea ports.
Those flows did not materialize at the anticipated scale. In August, shipments reached approximately 25% of the expected volume. Domestic prices fell as logistical problems mounted and buyers turned to alternative origins. This shift supports European wheat prices and increases the importance of available stocks in the Southern Hemisphere, particularly in Argentina and Australia.
Oil and Biofuels Reshape Agricultural Supply and Demand
With oil prices at a new level, around US$ 80–85 per barrel compared with approximately US$ 55–60 at the beginning of the year, policies to expand biofuels gained momentum.
Key developments include higher blending mandates in the United States, progress toward B50 in Indonesia, and increases in ethanol and biodiesel blending rates in Brazil.
The impact on vegetable oils was immediate. Prices rose and crushing margins shifted across major producing regions, particularly in the United States. This environment strengthens incentives to crush soybeans and directs a larger share of U.S. soybean demand toward the domestic market.
With a smaller U.S. exportable surplus, Brazil is strengthening its position as China’s leading supplier of whole soybeans, currently accounting for approximately 75% of that market.
At the same time, Argentina’s oilseed crushing industry is gaining ground, even without a domestic biofuel market comparable in size to those of other countries.
The reduced availability of competing oils, particularly palm oil, also contributes to this shift. Indonesia and Malaysia are allocating increasing volumes to biofuel production, reducing supplies available for export.
Against this backdrop, India, the world’s largest vegetable oil importer, has significantly increased soybean oil’s share of its purchases. This primarily benefits Argentina, the world’s largest soybean oil exporter, while also creating opportunities for Brazil.
New Roles in Global Trade
The roles of major exporters are being redefined. Brazil is consolidating its position as the leading soybean supplier to China and the global market, while higher vegetable oil prices encourage the expansion of crushing in producing countries.
On the demand side, India is becoming even more important, while the global vegetable oil supply-demand balance tightens as biofuel mandates increase in the United States, Indonesia, and Malaysia.
In these countries, such policies have a strong economic rationale: supporting domestic production and reducing dependence on petroleum-based fuels. This differs from the rationale behind some European biofuel policies, which were initially more closely linked to environmental objectives.
Uncertainty Is Set to Persist
There are no signs that the final four months of the year will be calmer. Geopolitical conflicts are being compounded by significant political factors in the two largest economies in the Americas.
The U.S. midterm elections will serve, in part, as a referendum on the Trump administration’s policies. In Brazil, the presidential election also adds uncertainty to the market.
Meanwhile, central banks will need to balance support for economic activity with inflation control amid higher energy costs and greater geopolitical uncertainty.
Climate risk is also returning to the forefront. With the prospect of a strong El Niño, weather maps and forecasts become increasingly important from September onward, particularly for Brazil.
Current price levels may also encourage an expansion in the area planted with grains across major producing regions in 2027. This prospect is already beginning to be reflected in agricultural market expectations and prices.
The 2026/27 crop season therefore shows that ample stocks alone are not enough to ensure stability. Geopolitics, energy, biofuels, logistics, monetary policy, and climate have gained influence over price formation and are likely to continue shaping volatility in the global grain market.
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