Markets Caught Between Peace Hopes and Escalation Reality as Naval Blockade Looms

Friday’s trade was another tentative day of positioning ahead of a weekend of peace talks between the US and Iran with the grains fading but the soy complex higher on strong world bean meal prices. As the trader’s try to separate the non-war related markets and discover fair value in a challenging environment, the world production outlook continues to be impressive with record corn yields in Argentina and a fast, dry, and warm start to the US planting season. The balance of world political events and normal spring ag news will continue to battle each other until a lasting solution is found for reopening the Straits.

News and Notes:

- While the US planting season is off to a fast, dry, and warm start, the lack of any soaking rain systems will keep the pace up but also is beginning to be a concern. Rain across the entire Corn Belt is needed within the next 10 days. SA weather remains a non-issue as Argentina’s harvest ends and early emergence of Brazil’s safrinha crop is in good shape.

- With so many markets directly affected by the war, I wanted to include an extra chart this weekend. Unfortunately, the bigger USDA corn planted acreage guess and near perfect planting weather (so far) have pressured corn from the test of $5 last month and moved back into the top end of the 2-year new crop range at $4.70. Beans continue their impressive move higher as they have consistently worked higher since early 2025 despite record crops from Brazil over their past 2 growing seasons and China’s flattening demand. The diesel chart is representative of progress or setbacks in the Iran peace talks and re-opening the Straits. Be patient with purchases of your diesel needs if you can. The Dow Jones stock index has gained back all the war losses as investors are looking forward with more optimism as progress is being made in Iran and lower-than-expected US inflation numbers.

- Last week’s 2-week cease fire agreement and this weekend's high-level negotiations in Pakistan between all major leaders and parties involved. There are still major differences in timing and control of the Straits, but the energy and equity markets are trading optimistically that the closure will end sooner rather than later.

- Cattle prices continue to soar with June cattle futures again making a new round of contract and new all-time highs. No progress has been announced on a screw worm vaccine or the Mexican border re-opening and continued strong retail beef demand heading into the warmer weather grilling season, there are no obvious potholes in the spring cattle road.

- Wheat has been the hardest hit grain as rain in the drier parts of the southern US Plains and the expectation of more wheat coming through the Straits. Wheat’s weakness and a fast start to US planting will continue to add pressure to corn prices.

- The SA crops are in great shape with Argentina’s corn yield far exceeding expectations which could help push total SA corn output 380-440 MBU above last year and 250 -270 MBU above earlier expectations. There will be significant world competition for corn exports in 2026.

- Weekly Changes: Corn – 11 1/4 (May ‘26), - 9 (Dec ‘26), Beans + 12 1/4 (May ‘26), + 3 3/4 (Nov ‘26), Wheat – 28 3/4 (July ’26), Crude - 846, Diesel - 4239, Dow + 1500, US Dollar - 1446, Cattle + 290, Feeder Cattle + 172, Hogs -47, Cotton +192, Milk + 70 (17.03).

Weekend peace talks between the US and Iran in Pakistan proved ineffective as President Trump announced early Sunday morning that the US will set up a naval blockade of the Straits of Hormuz. While progress was made on several other key issues, Iran’s hardline stance about rebuilding their nuclear program became too much of an obstacle to overcome for the US. Specific details of how the US will implement the blockade, and which ships will be released over the next few days, but it is clear that the US will be in control of what comes in and out of that region. Opening calls are expected to follow the energy markets higher, but last week’s beginning of grain fundamentals separating themselves crude and equities will be closely watched. Have a great Sunday and be careful when you head to the field.