Industries & Companies
Q2 2026
Commodity Pulse: Direction Matters Less Than Transmission
Commodity markets are no longer moving as one inflation trade.
Farm inputs, food ingredients, energy and industrial materials are following different supply cycles, and the price on the screen is often several steps removed from the cost that reaches an income statement. The useful question is not simply whether a commodity is up or down. It is how quickly the move reaches contracts, freight, conversion cost and customer pricing—and which participant in the chain has the leverage to keep or absorb the change.
The farm and food-input briefs focus on three questions: what is happening in the underlying market, why the move is occurring, and whether it is likely to change in the near term. Where the trend is unlikely to turn on its own, the outlook identifies the supply, demand, weather or policy conditions that would have to change first.
Farm & Food Inputs
Milk | Softening
What is happening: Milk prices are softening as supply expands. USDA raised its production expectations as cow inventories increased and lowered the 2026 all-milk price forecast to $20.00 per hundredweight.
Why: The change is primarily supply-led: more cows and higher expected output are adding milk faster than domestic and export demand is absorbing it. The effect will vary by class and component, so cheese, butter, protein and beverage-milk economics will not move in lockstep.
Near-term outlook: The softer trend should persist unless heat or disease reduces output, producer margins trigger faster culling, or exports and cheese demand strengthen enough to absorb the additional milk.
Coffee | Off the peak, still structurally expensive
What is happening: Arabica coffee has eased from its spring peak but remains structurally expensive. The World Bank benchmark moved from $7.30 per kilogram in April to $6.79 in June, still well above 2024.
Why: The market is shedding some near-term risk premium as supply expectations improve, but recent crop shortfalls, low inventories, weather risk and origin and currency differentials continue to support prices.
Near-term outlook: Additional easing is possible, but a return to the old cost base is unlikely in the next few months. That would require strong Brazilian and Vietnamese crops, an inventory rebuild and stable freight and currencies; another weather problem would quickly tighten the market again.
Cocoa | Lower than 2025, not yet stable
What is happening: Cocoa is well below its 2025 average but has not settled into a clean downward trend. The World Bank benchmark reached $4.40 per kilogram in June, sharply above April after falling from the prior year’s extreme.
Why: Lower grindings and better crop expectations removed part of the scarcity premium, but inventories remain thin and the market is still vulnerable to West African weather, disease, farm investment and crop-quality problems.
Near-term outlook: Volatility is more likely than a steady decline. A durable normalization requires more than one improved harvest, a visible rebuild in inventories and enough farm-level investment to lift yields; renewed weather or disease problems could reverse the relief quickly.
Soy | Balanced bean, tighter oil economics
What is happening: The soybean balance looks manageable, while soybean-oil economics remain tighter. USDA projected 4.475 billion bushels of production, 310 million bushels of ending stocks, an $11.40-per-bushel farm price and soybean oil at 70 cents per pound.
Why: Adequate bean supply is containing the crop price, but renewable-fuel demand, biofuel policy and competition with tropical oils are supporting the oil component independently of beans and meal.
Near-term outlook: Beans should remain broadly balanced unless weather reduces yields or exports accelerate. Soybean oil is less likely to soften without lower biofuel demand, additional crush capacity or improved palm and other vegetable-oil supply.
Corn | Manageable price, smaller cushion
What is happening: Corn remains affordable by recent standards, but the supply cushion is getting smaller. Stronger feed demand and exports reduced projected ending stocks by 170 million bushels to 1.8 billion even as USDA held the season-average farm-price forecast at $4.40 per bushel.
Why: Production is still large enough to avoid a national shortage, while consumption is running ahead of earlier expectations. That makes weather, local basis, transportation and export pace more important than the headline price suggests.
Near-term outlook: The market is likely to remain range-bound but increasingly weather-sensitive. A material move higher would require yield losses or another demand surprise; a strong harvest and slower exports or feed use would rebuild the cushion.
Cotton | Ample fiber, complicated landed cost
What is happening: Cotton supply is ample. USDA raised production and ending stocks, maintained a 73-cent-per-pound farm-price forecast and projected a 29.5% stocks-to-use ratio.
Why: Available fiber is growing faster than demand, but the raw-cotton benchmark is only one part of the delivered cost of yarn, fabric and converted products. Tariffs, country of origin, mill capacity, currency, minimum runs and freight can keep finished inputs expensive even when cotton itself is soft.
Near-term outlook: Raw fiber should remain relatively contained unless weather damages the crop or demand strengthens unexpectedly. Landed costs will fall more slowly and require lower trade friction, better mill competition and relief in conversion and freight.
Cattle | Scarcity remains the governing fact
What is happening: Cattle supplies remain tight, and USDA has reduced beef-production expectations while raising cattle-price forecasts.
Why: Several years of drought, herd liquidation and difficult feed and financing economics reduced the breeding base. Rebuilding takes time because retaining heifers initially removes animals from near-term beef supply before those animals can produce calves.
Near-term outlook: Scarcity is unlikely to reverse quickly. A durable change requires better pasture and feed conditions, sustained heifer retention and multiple calving cycles. Demand destruction or a sharp rise in beef imports could cool prices sooner, but neither would rebuild domestic supply.
Energy, Materials & Risk Signals
Oil | Crude eased; delivered energy has not fully followed
What is happening: Brent averaged roughly $85 per barrel in June, down sharply from May, and EIA projected a lower third-quarter average.
Tailwind: Continued normalization would reduce future fuel, resin and freight pressure.
Headwind: Refining margins, inventories and surcharge formulas move on different clocks, so screen-price relief may arrive late. Decision: operators should model the lag by lane and customer, negotiate fuel mechanisms explicitly and avoid counting uncontracted savings in the operating plan.
Natural Gas | Adequate supply, rising system demand
What is happening: U.S. natural gas averaged $3.15 per MMBtu in June, while EIA expected record production to meet higher power demand.
Tailwind: Supply growth contains the national benchmark and supports energy-intensive manufacturing.
Headwind: Weather, regional basis, grid congestion and data-center load can make delivered power and reliability more expensive than the commodity average implies. Decision: plants and cold-storage operators should separate price hedging from reliability planning and stress-test regional utility exposure before adding capacity.
Metals | Expensive benchmarks meet tariff friction
What is happening: June benchmarks for aluminum and copper remained well above their 2025 averages, while U.S. steel-mill producer prices rose in June. Tailwind: specification changes, lightweighting and supplier competition can offset part of the pressure.
Headwind: Tariffs and conversion costs widen the gap between global benchmarks and the invoice for cans, closures, shelving and equipment.
Decision: Operators should qualify alternative gauges, materials and origins now, then decide which specifications protect the consumer promise and which merely preserve habit.
Lumber | Soft demand, tighter domestic capacity
What is happening: Lumber producer prices rose in June even as construction demand remained subdued, and domestic sawmill capacity continued to contract.
Tailwind: Weak end-market demand can create negotiating windows for routine purchases.
Headwind: A smaller supply base leaves pallets, crates, repairs and expansion projects vulnerable to regional spikes and service constraints. Decision: buyers should contract critical packaging and maintenance needs around service and availability, not assume that a soft housing market guarantees cheap delivered lumber.
Gold | A confidence signal, not a bill-of-materials forecast
What is happening: Gold remained far above its 2025 average as investors continued to pay for protection against policy, currency and geopolitical uncertainty.
Tailwind: For holders, the asset can provide liquidity and diversification.
Headwind: For operating companies, the more relevant message is persistent uncertainty that can affect the dollar, borrowing costs and supplier behavior. Decision: owners should read gold alongside rates, currency and credit conditions and use the signal to test liquidity—not to speculate inside the operating company.
Operator Lens
Track four prices for every material exposure—the market quote, the contracted price, the landed cost and the price recovered from the customer. The decision belongs in the gap between them.
