Commodity markets turn bearish as fundamentals take charge

The war in the Middle East quickly pushed commodity values higher in early March, with crude oil leading the way. The strength in crude oil also spilled over to precious metals, aluminum, fertilizer and agricultural commodities.

Prices since the peak in March have slowly been dropping, depending on the commodity.

There is a tendency to assign all market moves to the impact of the war, but fundamentals are also playing a key role.

Fertilizer prices (urea) have dropped back to prewar levels, although values for phosphate-based products remain well above what they were before the conflict.

The drop in fertilizer prices has more to do with the seasonality of fertilizer use. Most of the fertilizer requirements for the 2026 crop have now been applied and demand has dropped. This in turn has lowered prices.

Seasonality is also playing a role in lower grain and oilseed prices, which tend to rally in the spring until the crop is planted. If normal growing conditions persist, markets tend to sell off in June and early July. The sell-off has arrived as the calendar turned to June.

Row crop planting is essentially complete in the United States, which is pressuring prices for corn and soybeans.

The drop in soybean values has pressured canola futures over the past week. The nearby contract has lost C$40 per tonne since establishing a new contract high in early June. Canola values have been supported by strong soybean oil futures.

There are still concerns in the canola market, considering planting has been delayed in key northern and central Saskatchewan growing areas. This has resulted in relatively strong prices for canola when compared to wheat and other grains.

Spring wheat prices over the past month have dropped by more than US$1 per bushel since the middle of May.

Seasonality is playing a large part in the lower prices for all three wheat futures contracts.

Winter wheat harvest, despite the reduced size of the crop, is pressuring prices as the harvest pushes into Kansas. The overall winter wheat harvest is 11 per cent complete, which is well above the six per cent average.

The combination of harvest pressure and a relatively good start to the spring wheat growing season has been responsible for the drop in prices.

European and Black Sea crops are only one month away from harvest, which is also pressuring global wheat markets. This seasonal pressure should see wheat harvest lows established in July.

Wheat market fundamentals remain firmly in charge of determining prices, regardless of what is happening in the Strait of Hormuz.