Crude Oil Rally Fails to Lift Grains as Market Fatigue Sets In

Although President Trump announced an extension of the cease fire, the markets are beginning to react less predictably as crude oil was sharply higher to post new 2-week highs but did not have the same lasting effect on the grains and soy as all finished well off the early highs with beans making an ugly technical reversal. US planting weather forecasts and news from Iran will drive direction for the rest of the week as world traders have become exhausted from trading the daily headline risk. Thursday’s weekly export report is not expected to be overwhelmingly bullish or bearish, but corn should have another good week.

News and Notes:

- A two-storm pattern for the next 7-10 days will help the driest areas across the southern Plains and Delta. The Midwest outlook is still on the cool side, but some drier relief is noted through the weekend for an acceleration of Corn Belt planting.

- The daily chart on Page 2 is for July beans which made a run over $12 to make a new 5-week high in overnight trade following bean oil higher before reversing to end the day with an ugly technical reversal. With the 20-DMA (red line) and 50-DMA (green line) converging at $11.81 3/4, today’s close at $11.79  sets up a gut check for the bulls as a weekly close below the 20 and 50 DMA’s would set up a test of the 2-month low at $11.56 3/4 and then support from the 100-DMA (blue line) at $11.42. If the trade meeting gets postponed again, I expect a rather quick decline like we saw on March 16th when the original meeting was postponed from early-April to mid-May.

- The extension of the cease fire was not greeted as bearishly as the last one was and when Iran seized a cargo ship, the markets most acutely effected was crude oil as it rallied over $3 to a new 2-week high daily close. With the US not sure which Iranian leadership group has enough power to negotiate a lasting cease fire and Straits re-opening, the timeline for a reopening is unclear. We thought we were close last Friday, now there is no clear finish line. Southern Hemisphere fertilizer supplies will be closely watched if the Strait stays completely shut for another month.

- Despite more uncertainty and crude oil back above $93, the US equity markets rallied strongly today with the tech heavy Nasdaq making new all-time highs with other indexes just below recent all-time highs. While our renewable fuel stock markets are acting more sensitively to crude, world equity investors are looking past the Straits closure. There are more cross-currents in the raw material markets, but the equity markets are trading impressively independently.

- Corn demand is the only export bright spot on the sales side as another solid corn sale of 5.2 MBU was announced this morning to Unknown. While the weekly ethanol numbers were down from last week, the annual pace is consistent with the USDA projections and above last year’s YTD totals. With bean oils rally to new contract highs, importing Chinese used cooking oil (UCO) which has historically capped significant edible oil-based rallies.

- After a long winter meeting season, we are taking some vacation time. There will be daily updates, but they may come at odd times, but any major market news or moves will be discussed. 

The grain and soy markets showed another crack today as advancing crude oil prices were not able to keep profit taking from erasing early gains. The headline risk for both rallies and sharper breaks is negotiations with Iran closely followed by US planting weather and progress. Today’s November bean test and failure at the contract high ($11.74 ¼) continues to define a 30-cent range that is supported by record bean oil prices and the potential that US bean acres will be lost to corn acres as planting conditions improve. December corn still has not seriously tested the war induced high of $4.98 ½ which shows stalling momentum and a lack of interested buyers for both at these high levels.