Grain Markets Ignore $5 Crude Rally: Is Weather Now the Bigger Story?

A good US weather outlook collided with another unproductive weekend of negotiations to reopen the Straits as soy and grain prices started the month lower in the face of sharply higher crude oil prices. This disconnect had been hinted at in last week’s trade, but today’s clear divide was traders beginning to price in a higher potential of trend line US yields adding to already ample world stocks, regardless of what goes on in Iran. With President Trump’s conflicting updates on today’s negotiations with Iran, the energy markets added premium as if fighting would soon be restarting, but the bio-fuel related markets traded like crude oil was lower, while the world equity markets shrugged it off and concentrated on strong earnings to move to another round of new all-time highs. It seems impossible for the markets to all trade independently from developments with the Straits, but finding fair value now has other considerations.

News and Notes:

- Today’s lower trade was largely influenced by a wetter US Corn Belt forecast into mid-June and the longer-term models showing no threatening heat or prolonged dry conditions. There remain areas of concern in Europe and China, but the market has begun to price in a 180+ US yield. If the USDA releases the initial crop ratings this afternoon, they are expected to be above average.

- The December daily corn chart is on Page 2 and shows today’s important bounce off the day's lows which happened to coincide with a test of both long-term trend support (broken red line) at $4.69 and a bounce from the 200-DMA (solid black line)at $4.68 1/3. Those technical areas have acted as a breakout point in early February and/or support since early March. One interesting set of numbers is important to know. Last year on the first of June the funds were short 770 MBU of corn and long 40 MBU of beans. The funds started today with net longs of 900 MBU of corn and 950 MBU of beans. The annual change is probably historic when there was not a weather event involved, but it does show that the funds may already be holding all the corn and beans they want for now.

- The hardest part of trying to decide if negotiations are going well or poorly is that no one really knows who is speaking for Iran, as it could be several groups (from hard line to more moderate) with different ideas. Every trader in every market is tired of the uncertainty and appears to be trying to move on toward a more normal trade despite the risk of the war re-igniting. Frustrating times.

- Thanks to Helena Agri for making the FieldLink podcast available. Please listen to the latest update.

- The only part of the bean complex that was higher today was bean oil as it continues to move in lockstep with crude and movement toward expanded demand from China. China was reported as a buyer of US sorghum today that adds optimism that China is about to make the steps necessary to be a larger buyer of US ag products as was announced last month.

The three major factors I see moving forward in June are crude oil prices, Chinese demand, and the health of the US crops. While there is the obvious factor into how crude oil prices will move, the factors involved in the Chinese demand story are starting to unfold as is the US weather and US yield potential. All of these are important with war developments probably in the lead, but we could get bearish outcomes in crude oil and US yield, which Chinese demand could almost completely offset. The back and forth of the news in each of these factors will create an even more volatile landscape, but the odds of all three turning suddenly bearish or suddenly bullish are unlikely as they are so independent of each other. Continue to look for sales opportunities on rallies but make sure your marketing plan is put together with some skepticism of a rally to push the prices to new 2026 highs. Please call if you are looking for any trading ideas as our strategies for our managed bushel program Wingman have been working well in this market environment.