Powell’s pivot and agri-markets: what to expect from Fed’s next moves — ASAP Agri

On 22 August, U.S. Federal Reserve (Fed) Chairman Jerome Powell signalled a shift in rhetoric during the Jackson Hole symposium, indicating readiness for a softer monetary policy. He acknowledged that inflation risks in the U.S. remain elevated due to tariffs, but signs of a cooling labour market are becoming increasingly evident, says Victoria Blazhko, Head of Editorial, Content and Analytics at ASAP Agri. This paves the way for rate cuts sooner than expected. Currently, the federal funds rate remains in the 4.25%–4.50% range, but the market is almost certain that a rate-cutting cycle will begin as early as September.

This became a signal for all financial markets: the dollar weakened immediately, stocks climbed, and gold surged. But for agricultural markets, this is more than just background noise — such changes directly impact grain and oilseed prices.

Dollar weakens

The dollar has been gradually losing ground: since the start of the year, the DXY index, which tracks the dollar against a basket of six major currencies (euro, Japanese yen, British pound, Canadian dollar, Swedish krona, and Swiss franc), has dropped from 110 to around 98. A weaker dollar makes U.S. grain more affordable for foreign buyers, as evidenced by strong export sales in August, and increases competition in the market. A cheaper dollar also supports agricultural futures, while a stronger dollar puts pressure on prices.

For example, in August, when the DXY fell from ~100 to ~98 points, the S&P GSCI Agriculture Index — which reflects the weighted average prices of major agricultural commodities such as wheat, corn, soybeans, and others — rose from ~340 to ~360. At the same time, this correlation is not stable, as other factors, such as crop volumes, demand from key importers, and speculative activity, also significantly influence the market.

For Ukrainian grain, a weaker dollar has a mixed but mostly positive effect. On the one hand, competition from major players — the U.S., Brazil, and russia — intensifies as their grain becomes more attractive to buyers. On the other hand, stronger global demand for raw materials and rising exchange prices support FOB prices for Ukrainian wheat and corn. A key factor for margins remains the hryvnia exchange rate: if the UAH does not strengthen along with the dollar, exporters benefit both in dollar and local currency terms; if the hryvnia strengthens, the additional revenue effect diminishes.

What’s next?

Powell’s pivot toward a softer monetary policy has already provided tangible support for agricultural markets. The logic is simple: lower rates weaken the dollar and increase liquidity, fueling investment and import demand for raw materials and keeping grain, oilseed, and other commodity prices from plunging.

Victoria Blazhko

Head of Editorial, Content and Analytics at ASAP Agri

"However, the monetary factor is only one piece of the puzzle. In the 2025/26 season, the main driver remains fundamentals: record wheat and corn supplies continue to weigh on prices, even against a favourable currency backdrop. Demand is rising, but not fast enough to quickly absorb these volumes. As a result, the “cheap money effect” has limits: it prevents futures from collapsing but does not ensure sustained growth."

The most likely scenario this season is relative stabilization: average price levels, moderate seasonal swings, and no sharp reversals unless major external shocks occur. For markets to enter a clear “bullish” phase, a combination of factors is needed — steady demand growth amid cheap money and a sharp supply reduction due to weather risks or political restrictions. Such combinations are rare, but if the Fed’s soft policy in 2026 coincides with climate extremes, prices could receive a powerful upward impulse. Conversely, if the global economy slows faster than expected and the “cheap money effect” weakens, even a softer dollar won’t prevent a market correction.

Ukrainian context

It is also essential to account for local specifics of the Ukrainian market. This season, the corn market has effectively “decoupled” from Chicago: prices moved asynchronously, and the basis reached record levels. This demonstrates that pricing is heavily influenced by regional and domestic demand, as well as local supply dynamics, which depend on harvest pace and farmers’ increasing ability to hold back grain in anticipation of better prices. In such an environment, global signals from the Fed and currency markets have only a partial influence on the Ukrainian market, while domestic factors tend to take the lead.