Peace Deal Hopes Trigger Sharp Selloff Across Grain and Energy Markets

Momentum from both countries toward a US/Iranian peace deal pressured all raw material markets with the energies sharply lower and leading the raw material losses. Corn, ethanol, beans, bean oil, wheat, and diesel were the most obvious markets to get pulled under with the sharp losses in crude, which made for a nerve-wracking day. After Friday and Monday’s pushes in new crop corn and beans over $5 and $12 on fears of an extended closure of the Straits after recent Iranian attacks on ships in the Straits, the bulls mood was curtailed with today’s news. Since the war started, the markets have been on a hair trigger (both bullishly and bearishly) with every tweet, rumor or headline causing heart-burn inducing volatility, with opportunities appearing or vanishing in the blink of an eye. Direction the rest of the week wrests entirely on the news on a peace deal, which judging from recent history, could be just as bullish as today was bearish.

News and Notes:

- Corn Belt weather remains unseasonably cold, but the coldest of this system is forecast to be over. A warming trend starts in earnest this weekend. Despite the cold, US planting progress through this weekend should push both corn and beans over 50% complete and the warmup and normal rain pattern into mid-May will set up for favorable germination conditions. The drought maps for Brazil continue to show 25-30% of the safrinha crop is in drought conditions, but recent rains in Mato Grasso Du Sol and Parana improved their crops. Early harvest will start in 2 weeks.

- The June crude oil chart is on Page 2 and shows the whiplashing volatility each day. The early morning break to the daily lows at $88.66 briefly fell below the 50-DMA (red line), but the $21.50 a barrel break since last Thursday proved to be enough for some recent bears to take profit, while the more peace skeptical end users were happy to step in to take coverage on the 23% 5-day break. It is not coincidental that the last major price break (Fri April 17th when the Straits were said to be re-opened) went right to the same 50-DMA and bounced impressively. There are fundamental traders, headline traders, and technical traders all driving intra-day price direction. The next move for this chart is completely driven by peace treaty news.

- The US/China trade summit is still scheduled for late next week, but there has been very little public chatter from either China or the US about any preliminary meetings to set an agenda. Historically, these major trade meetings have a good bit of back-and-forth rhetoric from both sides ahead of the meeting as they position for negotiating leverage, but that has not been heard this time.

- At the request of many of you, I have put together several option strategies using both calls (re-ownership) and puts (setting a floor) that give you several different timing windows for all the events that may occur this growing season. The lawyers do not allow us to put out specific trades for multiple reasons, but if you have any interest in an explanation of what we found, please email, text or call either Brady or me when you have a minute.

Everyone who trades any market has a love or fear of big round numbers. $100 crude oil, $5 corn, $12 beans are the most recent examples as none of these markets could spend any meaningful length of trade over those numbers, much less punch through them to accelerate the rally. It is good to see that farmer selling has been active during the last few weeks, because today highlights just how quickly they can turn against you. If you did not sell enough during these rallies and your crop is planted or nearly planted, please make you catch up sales at the market. Prices in November beans and December corn are just 25 and 16 cents below multi-year highs (2% and 3% respectively) and since they have rallied so far, you cannot make the same mistakes made in 2022 and 2023, where trying to claw back nickels, ultimately cost you quarters or substantially more. If a peace deal is signed, the calendar works against corn and bean rallies. The crop is going in quickly, US weather is improving, and it will be a long 7 weeks until the June 30th Planted Acres report during a seasonally neutral to bearish market period. Do not be greedy if you are undersold, sell some bushels and take today as a warning that when the Straits re-open, you will need a US weather problem to exceed the recent highs.