Crude Surges on Delayed Peace Talks, Igniting Broad Commodity Rally

A postponement of Vice President Vance’s trip to negotiate a lasting peace deal with Iran caused crude oil prices to move sharply higher which pulled bean oil to new contract highs which moved both old and new crop beans higher while also helping ethanol and corn rally. Increased concern of the poor wheat crop conditions reported on Monday helped push wheat to new 2-week highs. The grain and soy markets will be dealing with two major inputs in the weeks ahead as a resumption of the war would be bullish for the energy markets and help corn and beans while a dry and warmer planting forecast would provide pressure during the energy support. The markets have continued to trade with support and at higher levels than many thought at the beginning at the year, letting the markets tell you where they want to go rather than trying to fight the sometimes-conflicting moves is a sign that the speculative money continues to see raw material markets as good investments.

News and Notes:

- A line from Omaha to Indianapolis continues to see too much rain for widespread planting with a wetter forecast for the next week, although temperatures will warm back up to normal early spring levels. The markets will notice when the forecasts change, but the sheer speed the crops can be planted will not allow for a break away rally driven only by slow planting concerns.

- The daily chart on Page 2 is for November beans and shows today’s sharp bounce from the recent days trading just above the 20-DMA support. Today’s close was just under the contract high close and only 8 ¼-cents below the contract high. Bean oils impact on beans will be largely driven by the crude oil market, so expect a new contract high if the cease fire agreement ends and crude makes another run at $100.

- Monday’s planting progress report showed planting totals in line with estimates but slightly behind the 5-YA. The surprise in the report was better than expected planting progress in Indiana and Illinois, who have been dealing with too much rain.

- Feeder cattle have closed lower for the last 5-sessions (live cattle the last 4) after posting a new all-time last week. Feeders have closed under the 20-DMA the last two days for the first time in a month. Concern that gas prices will remain higher for longer and use discretionary income that has kept beef demand strong even at record high prices.

- 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.

Normally big moves come with several meaningful stories, but today’s moves are easy to explain. The rest of the week will be driven by negotiations (or lack of) with Iran in the next 24-hours. An extension of the cease-fire would not be as bearishly traded as the original agreement, but since we have seen how quickly the trade can move from concerned buyers to panic sellers, expect a continued high level of volatility. The most bearish case for prices is a US forecast change to drier and an open planting window for the most delayed areas and a re-opening of the Straits. The most bullish case is also easy to define if crude oil rallies sharply and the wet forecasts extend into May and prevent plant concerns mount. With margins tight or non-existent, farmers and their lenders would have interesting conversation is prevent plant insurance dates come into play with a wet May forecast.