Big news for the grain market often emanates from Washington, but the story in mid-September is likely to break a couple miles from the USDA building.

With one key report out of the way and another not due until the end of the month, corn and soybeans markets may move according to the headlines from Sept. 18, when the Federal Reserve rules on monetary policy.

While the first interest rate cut in more than four years seems a done deal, the size of the reduction and officials’ expectations for more could continue to move corn and soybean prices more than details about supply and demand.

Interest rates can swing currency values like the dollar, which in turn impacts commodity markets denominated by the greenback.

The Sept. 12 update to World Agricultural Supply and Demand Estimates from USDA didn’t produce any major news, and the next fundamental report from the agency won’t come until the end of the month with release of the size of Grain Stocks leftover at the end of the 2023-24 marketing year.

Fallout from the latest government data was difficult to discern, in part because – as expected – the WASDE produced only minor tweaks. But we know traders got to trade something and many are focused on interest rates as their prime suspect.

The shiny object savored by speculators could change quickly, of course, especially as grain markets grope for seasonal harvest lows. Tracking those trends is the job of price charts, which also suggest futures moving closer to turning points.

So, here’s what to watch from WASDE print and the Fed.

Big crops stay big

For the record:

The data doesn’t really move any needles much and my forecasting models suggest somewhat limited hopes for the farmer with average production costs to hedge inventory for a profit in the coming year.

The problem for both corn and soybeans is crops that are too big, with soybeans a record at 4.586 billion bushels and corn nearby history at 15.186 billion. Corn demand was projected to reach an all-time high and soybeans close to it, but too many days’ supply would still be on hand by the time the 2025 harvest gets underway.

Corn comes closer to its average break-even right now. But soybeans are more hope than reality. Still, soybeans are more dependent than corn on what happens this fall and on weather in South America, where crops are only now being planted as another La Nina cooling of the equatorial Pacific starts brewing.

Corn hinges on exports

My models put the top-third of the expected range for nearby futures in the year ahead at $4.02 to $4.32 with break-evens at $4.74. March futures, in the mid-point of next year’s 2024 crop contracts, traded up to $4.31¼  on Friday with the weekly top at $4.43¾. This movement met my objectives but still left the average-cost grower with average yields in the red.

Changing demand for corn quickly is hard to do. Usage by livestock operations depends on prices and the number of critters to feed, and the size of herds doesn’t normally move fast. Ethanol plants are a stable and steady source of demand, but corn-based biofuels likewise aren’t a big growth story anymore. Exports hinge on how our supplies compare to the competition – and the world has plenty. The number-of-days usage is expected to run 10% above the 20-year average.

Nearby futures held a test of $4 last week but remain stuck in a downtrend with December moving close to overbought status. A break above $4.60½ would reverse that dynamic, but is still nearly 50 cents away.

Will La Nina matter?

Soybeans could have more upside from current levels, but still might only transition to worse from bad. My models put the top-third of the expected selling range from $10.34 to $11.12, well above last week’s $10.53½ high. But break evens for average nearby futures are at $11.56, giving the board some work to do. And my models already are more optimistic than USDA about demand!

My estimates for crush and exports top USDA’s but La Nina could reset the table. A transition from the “neutral” phase of the El Nino-Southern Oscillation is expected to get underway soon. “La Niña is favored to emerge in September-November (71% chance) and is expected to persist through January-March 2025,” according to the watch issued last week.

Soil moisture is short in much of Brazil’s growing region and parts of Argentina, raising concerns about farmers’ ability to plant crops in a timely fashion. Even if delays don’t punish production, a later harvest could extend the U.S. selling season, but that evidence also will take time to emerge.

How much, how fast?

That could brighten the spotlight on Wednesday’s Fed meeting, which releases its statement monetary policy at noon CT, when the “dots” summarizing forecasts of participants’ outlooks for interest rates, growth and inflation also are updated for the quarter. Fed Chairman Jerome Powell then holds a press conference at 2 p.m.

The market is torn on both the size of Wednesday’s expected cut and how many more will follow in 2024 and 2025. Data the Fed relies on to set these policies is mixed, suggesting a slowing economy, but one where risk of recession is unclear. 

Betting on Federal Funds futures indicated the market was fairly evenly divided, with half the wagers backing a cut of one-quarter of 1% and the other seeing a half-point drop now and another two points by the end of 2025. This would take short-term rates below 3% from their current mid-point between 5.25% and 5.5%. Depending on what other central banks do around the world, that could continue to weaken the dollar, providing lift to commodities from corn to crude oil.

The market may stick to that narrative or look for another theme for traders. Anyone forgetting there’s an election coming up? Didn’t think so.