Grain Markets Show Resilience Despite Energy Collapse and Historic Fund Selling

The most tangible weekend of progress in ending the war with Iran and re-opening the Straits set the stage for a rather impressive day of grain and soy trade, despite the modest gains. After sharp early losses when crude oil fell over 5% with WTI falling to new 2-month lows under $79, corn, beans and wheat all closed well off the overnight lows with an impressive spike reversal. The agreement signing to end the war and open the Straits is scheduled for Friday, which is a market holiday, so there is still time and other moving parts to upset today’s progress, but traders are showing hope and confidence as several of the major world stock markets made new all-time highs in today’s massive relief rally.

News and Notes:

• After weekend rains for most of the Midwest, temperatures into late June will become unseasonably cool running 10-15 degrees below normal over the Corn Belt and south. The crops will not be under stress but need more growing degree days or pollination will run deeper into July where several long-term models have temperatures heading back above normal. Cool and wet will not spark the bulls, but heat during pollination may raise some eyebrows.
• The daily December corn chart is on Page 2 and shows today’s reversal attempt after setting new contract lows in early trade. With the funds modestly short corn for the first time since February, it is hard to see them continuing to pile into the short side after the month long 70-cent break. Other important psychological levels tested and holding today were $11 in July beans and $6 in December wheat. While the markets do not need much weather premium today, there is no weather disruption premium in the markets. Dec corn at $4.35-$4.40 is pricing in no extra Chinese demand, no reduction in US corn acres in the acreage update and a yield of about 182 nationally. A 16.4 BBU US corn crop will not meet expected demand and any additional demand if China comes in this fall and buys the extra bushels they promised at the trade summit.
• There was so much to talk about in the weekend comment, we ran out of room to put in our latest podcast with Helena. Please take a few minutes to listen.
• Last week was a historic week of fund selling as the funds sold over 1.5 BBU combined of corn, beans and wheat to cut their bean long position to 450 MBU and are now short 26 MBU of corn and 400 MBU of wheat. There are no buyers in the market that can stand in the way of that type of aggressive selling. The markets are technically as oversold as they have been since  the July ‘24 collapse of 58-cents. The current pullback touched 73-cents last week.
• This afternoon’s crop conditions are expected to improve slightly, but yellowing waterlogged corn and the upcoming cooler temperatures will not allow for much improvement over the next 7-10-days.
• Feeder cattle jumped to new 3-week highs today on news that JBS is closing 2 more processing facilities, one each in Pennsylvania and Tennessee. Since the initial shock low from the first screwworm positive test in Texas, feeder cattle have rallied roughly $36 or 11%. The bullish cattle story is not faltering.

Today’s trade has to be viewed as a success for many reasons. The first is that corn, beans and wheat did not collapse when energy prices collapsed, as had been the trend for the last several months. The second is that a re-opening of the Straits will begin to calm down world energy and fertilizer prices. The third is that maybe the war is over, and the world is safer with Iran not having nuclear capability. Each of these would make for a good day, but all of them working together to lower fuel costs and not kill the bio-fuel sensitive crops is the ideal combination. There are still several key hurdles to return world commerce to normal, so this probably will not be a straight line to just worrying about the weather, China, and the June 30th USDA acreage update. Patience on sales is obvious but keep talking to your fertilizer dealers and your fuel suppliers to stay on top of how those markets are reacting locally to the improving world political landscape.