Markets Find Their Footing: Calm Trade Masks Shifting Post-War Landscape

Markets were mixed and choppy most of the day as a good, but not great weekly export report did not motivate the bulls to continue their recent buying streak. Crude oil prices rallied to initially help bean oil and ethanol prices, but the bigger news of the day was new all-time highs in the major US equity markets were made. With two cease fires and peace talks in place for the US/Iran and Israel/Palestine, the general attitude is that the post-war world will be in better shape than most thought at the beginning of the war. Friday’s trade will not feature the nervous positioning of recent Fridays as US planting moves along.

News and Notes:

• The persistent rainy patterns for the NCB will begin to change in the next week, but an active Midwest pattern remains in place as El Nino conditions rapidly build which historically brings more rain to the US. SA weather remains a non-event, but there are some models that show a drier start to safrinha pollination than previously expected. Keep an eye on that for the next month.
• The daily June crude oil chart is on Page 2 and shows that crude oil remains firmly in the middle of the range from the Sunday night opening ($75.60 to $104.34) after the bombing started. Several key seasonal and potentially yearly highs were made that week (Dec corn $4.98 1/2 and Nov beans $11.74 1/4) which shows more potential downside if the cease fire turns into a peace deal and re-opens the Straits for ordinary boar traffic. The energy markets have quieted but today’s bounce to and failure to push through the 20-DMA (red line) may be indicating the trade will start to pay more attention to the technical picture. One interesting note is the Relative Strength Index (RSI) at the bottom of the chart shows crude is oversold.
• Today’s weekly export report showed another good week of corn sales but within estimates while wheat and beans were also within estimate ranges but showing a seasonal slowdown as SA harvest hits the world pipeline. Weekly corn ground for ethanol increased week to week but remain comfortably on pace to meet the USDA’s estimate. The only slightly bearish demand news this week was the March bean crush number was below estimates (but still a record for March) while bean oil stocks were on the high side of expectations.
• Political leaders from every major ag producing country are searching their countries budgets to give price relief to their farmers as high fertilizer and fuel prices have significantly hurt every producer’s bottom line. Ag Sec Rollins said in a speech on Wednesday that the Trump administration is considering all options from relief packages to another Farmer Bridge Program to help offset the higher costs resulting from the closure of the Straits. Trump is also talking to the major fertilizer companies, but it would not make sense for them to give a discount to the US and no other country since the US buys only about 10% of the world’s ag inputs compared to 28% 20-years ago.
• Lobbyists for the renewable fuel industry have growing optimism that year-round E-15 sales could be passed in Congress’ upcoming session. It would help lower the cost of gas as one benefit. The most important thing about making year-round E-15 sales permanent would be the certainty desired by the ethanol industry to invest in more plants. A passage of year-round would be a big benefit for corn use in 2027 and beyond.

This week has been a welcome change of pace with calmer markets and no major shocking world news. Prices are well off the March highs but are still higher than most expected coming off SA record yields. There is one bullish camp for all raw materials that after the war, the world economy will come back strong as gas prices fall which would be the perfect set up for some inflation in the raw material markets. US planting weather is a very mixed bag as it is flying along where it is dry, but the NCB remains too wet for any progress for the next week or so. It is too early to add significant prevent plant premium, but the longer the delays occur, the later a meaningful portion of the crop will be planted taking away the early planted advantage on yield and earlier pollination. The week will end with far less anxiety than any Friday for the last month, which will hopefully allow for a calm session and weekend.