The Weekly Finger: Grains gone wild, the copper squeeze nobody's pricing in, and the bond market story tying it all together

G'day team,

Had a ripper chat with Heath Moss on Friday's Theory of Thing, recorded from our new digs on level 29 of the Westfield Tower (yes, the actual “Frank Lowy floor”, no I'm not allowed on the balcony).

We got into NVIDIA's monster quarter, the Fed suddenly pricing in a hike instead of a cut, and why the bond market's got everyone twitchy again.

Full episode here: Theory of Thing Investment Podcast.

This week's proper theme though: soft commodities have gone feral, copper's staring down a supply cliff, and both trace straight back to the same bond market story. Lots to get through, let's go.

Note: most of this I’ve been flagging for a while. Drought, war, supply shocks, demand continuation. We’re seeing the effects of those things now in markets. How exciting.

Good Golly, Look at the Grains

Mike Zaccardi put up a one week performance leaderboard that stopped me mid-coffee.

Wheat up 12%, cocoa up 10%, oats up 9%, soybean meal, palladium, corn, soybeans and cotton all comfortably green, all miles ahead of the S&P 500's measly 0.4%.

Here's the kicker though: gold was down 3.2% and silver down 3.6% on the same week. The metals took a breather while the paddocks caught fire.

That's not noise, that's a genuine rotation, and once you look at the chart shape behind it, it starts to make sense.

When the two hardest trades of the last three years, gold and silver, take a week off at the exact moment grains go vertical, that's capital rotating within the real assets trade rather than leaving it. Same thesis, different paddock.

The Bloomberg Agriculture index has carved out a lower high pattern since the late 1990s, every peak smaller than the last across 2008, 2012 and 2022. Until now. It's just cracked above that three decade downtrend line for the first time.

Zafar Shaikh over at Invesys Capital flagged the same setup on the GSCI Agriculture index, and paired it with a call worth sitting with:

An inflation adjusted S&P 500 hitting a wall after 17 years of real returns since 2009, tough times ahead for the Fed with rates still high, and a classic 1960s-70s stagflation setup where it becomes a stock pickers' and asset allocators' market rather than an index one.

Peter Brandt, who runs his own CBOT grain book, put it about as plainly as you can get:

His firm owns longs in Beans, Corn, Wheat and Meal, and by his own account it's the heaviest grain position he's carried in years, sitting alongside long Bitcoin, long sugar, long the Mexican peso and short lean hogs.

When a bloke who trades with protective stops as policy says grain prices look potentially powerful from here, it's worth a second look.

It's not just chart reading either. Wheat's rallying on real war premium, with Russia-Ukraine hostilities still choking Black Sea grain shipments and Russia reportedly weighing further strikes on Kyiv infrastructure.

Layer on heat and heavy rain hammering China's corn and soybean belts this summer, and you've got a genuine supply story sitting underneath the technical breakout, not just funds chasing a line on a chart.

Odd one out for the week, because it doesn't fit anywhere else and I can't stop thinking about it:

Note: this is fitted to suit a satirical narrative. The data is real but it’s been sufficiently tortured to reveal whatever the author wants. Still..funny stuff.

OddStats lined up the market since March 2026 next to the market from May 1929. Same 8% initial drawdown. Same shape of recovery: three weeks, then four, then up 10%, then a stretch of going nowhere, then up 11% again after 124 trading days.

In 1929 that point was followed a week later by the single worst financial disaster in American history. We're sitting at that exact spot on the calendar right now. Make of it what you will, I'm just the messenger.

Why it's All Happening at Once

None of this sits in a vacuum. Heath ran through it Friday: Scott Bessent's flagged using the Treasury General Account to help fund bigger bond buybacks starting 9 September, doubling the size of 10 to 30 year buyback operations from $2 billion to $4 billion a pop. It shook the bond market a touch, yields came off, the 30 year dropped a good ten basis points, and the US dollar's weakened on the back of it, which is a big part of why gold ran as hard as it did before this week's breather.

Zoom out and you can see why the market's jumpy. This is from AAS Economics' latest Money Supply & Macro note, showing the six year percentage increase in the US 10 year yield going back to 1871.

6 Year % Increase, US 10yr Bond Yield. Source: AAS Economics.

Every prior spike in the modern era, the 1970s, the early 1980s, tops out somewhere between 80% and 100%. The current one is sitting above 500%. That's not a bad quarter, that's structural.

The reason it can happen at all is this one, US money supply and its yearly growth rate, which spiked to nearly 80% during COVID and has settled into a still elevated grind since.

US Money Supply (AMS) and yearly growth. Source: AAS Economics.

And the bill's coming due. The US is now spending roughly 21% of federal revenue just servicing interest on the debt, back to levels last seen in the early 1990s, and closing in on the mid 1980s peak of near 29% when Volcker's rate hikes were still working their way through the system.

Full piece, worth your time if you want the whole argument on time preference and why central banks can't easily escape this, is here:

A New Bond Market Crisis? Money Supply & Macro #72.

That's the mechanical reason grains, gold, copper and silver keep finding a bid: when the unit you're pricing everything in keeps getting diluted, real assets do the work your cash can't.

The Copper Squeeze Nobody's Pricing In Yet

Willem Middelkoop shared Benchmark Minerals' Q2 2026 copper production table across the top 25 producers, and it's an ugly read if you're short copper.

Most of the top ten producers are reporting declining production year on year, Freeport, Codelco, Rio Tinto and Glencore among them. A handful are still growing, CMOC, Teck and First Quantum among the bright spots, but the trend across the biggest names in the business is down, not up, at exactly the point demand is accelerating.

Lukas Ekwueme zoomed into the country that matters most for that story.

Chile produces 24% of the world's copper, and production there is expected to peak in 2027. The chart shows Chilean output rolling over right as AI infrastructure build out and the US push to reshore manufacturing both lean harder on copper demand.

His line was blunt: we don't own enough copper for what's coming.

And here's the payoff chart, courtesy of Azuria Capital.

Median profit margins across every S&P 500 sector plus the top 20 precious and base metals miners, and mining sits at 31%, clear above financials and tech at 17% each, and more than four times consumer staples.

When the scarce input commands margins like that, the equity holders of the scarce input tend to do alright too.

Funnily enough this exact thread showed up in my own podcast wrap this week.

Rapid Critical Metals (ASX: RCM) extended a silver system 300 metres to the south with a strong hit, 37.4 metres at 278.8 grams per tonne silver equivalent within a broader intercept, a genuine dial mover for a stock that size.

Redstone Resources (ASX: RDS) is out testing copper and critical mineral targets at West Musgrave, good luck to Richard and the team there. Worth keeping half an eye on both while this copper and silver story runs.

And Barton Gold (ASX: BGD) is still in the mix too, it came up again in Heath's wrap this week off the back of last week's column, still trending, still liked.

See You On The Gold Coast

Small Caps is on the ground as media partner for Resources Rising Stars Gold Coast 2026, Wednesday 9 through Thursday 10 September at RACV Royal Pines Resort.

I'll be there interviewing directors live off the conference floor, so if you're an ASX resources investor, come and say g'day. It's free to attend and registration is open now:

Register for RRS Gold Coast 2026.

Stay safe and all the best,

James

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