Grains were higher early Tuesday with cattle making new highs and hogs lower.
Grains Pop Tuesday
Grain markets were seeing strength across the complex early Tuesday.
Jon Scheve with Scheve Grain thinks the markets have transitioned over to trading more of their own fundamentals as the lower crude oil market on talks restarting with Iran isn’t having much of an impact on the action.
In fact he thinks the market has been trading its own fundamentals this entire time.
“When you have oil up nearly 80% from before the war to its highest point in the middle of it, and corn was up less than 10%, I don’t think that corn was remotely following the crude oil. I think those are two separate things. Iran isn’t a producer of corn. It’s going to be a consumer of it.
You have a situation here where the market has kind of just continued to trade its own own issues and not been as worried about the war headlines as maybe one could have thought it might,” he explains.
Wheat Leading on Weather Concerns
He says the hard red winter wheat market is leading the charge on weather and crop concerns.
USDA reported 34% of the winter wheat was in good to excellent condition down 1% and compares to 47% a year ago.
States like Texas are showing only 15% of the crop is rated good to excellent with 54% poor to very poor. In Oklahoma only 10% of the crop is good to excellent, down 2% from last week and Kansas is at 32%, down 6%.
Scheve says that is supporting the market. “Today we’re seeing the hard red wheat, which is going to be that western Texas to Nebraska market. It’s trading significantly higher while the eastern Chicago wheat isn’t moving up as much. And I think that’s a function of just how dry it is out West and concerned that maybe they’re going to miss some rain. And the question becomes, does that wheat crop actually get some rain here in a couple of weeks or not?”
He says if it doesn’t rain wheat could get pulled out of the feed ration which might help the corn a bit.
Corn Following Wheat
However, if the wheat crop continues to deteriorate how much more weather premium does the market need to add and will that market pull up corn?
Scheve says, “Oh, I think it’s going to take a lot more from wheat to get corn to move. There’s just too much corn in the U.S. and we still are running into an issue that the USDA has created in that.”
He’s referring to the 6.2 billion bu. feed and residual estimate USDA is using in the balance sheets.
“They have the feed number on cattle so significantly high that how on earth are we going to meet those numbers? I mean, when animals on feed are down 10% or cattle on feed were down 10% year over year, cutouts, I think, were up slightly, but are not down as much as they were from the year before. How do we increase feed demand when the chickens and the pigs are pretty much steady. None of those numbers make any sense,” he says.
So he thinks eventually that number is going to come down in future reports to show us that we have too much corn left in the country.
“I think that’s just going to keep a lid on corn prices moving forward. Because even if we do see the futures go up, I think you’ll see basis struggle to go up. If anything, it’ll start to drift back if we see a 20 cent rally in futures.”
Highs in the Corn Market?
So the highs in the corn market hit on March 9, will those be the high water mark for a while?
He says, “I would struggle to say that they’re for the high for the year on the December. I think that the chances of that happening, based on the last 35 years of history, say that that’s only a 25% chance that the highs have been put in. It has happened once or twice in March but those are low odds. The odds favor that it’ll happen later on.”
Old crop is more unlikely to hit a new high he says, without some major change in fundamentals.
“I mean we’re two weeks away from the May contract being unimportant so really the last contract to worry about is July. July gets all the way into June. I think that you could potentially still take out those highs but it’s going to depend upon probably the world events it’s probably going to depend upon weather. You know, it’s hard to say that those highs aren’t in, but it’s probably the flip of a coin.”
Corn to See Open Planting Window
U.S. corn planting progress is at 5%, compared to 4% on average.
While the forecast shows rain chances are higher in the Central and Eastern Midwest it is too early to be concerned about any planting delays.
“If you have 70% of the crop in by May 15th that gives you an incredibly high chance of trend line or higher yields. And so we have some time to get that in. The average farmer can get the corn planted in about seven days and so many farmers anymore now are starting to move towards
having even two planters so that they can plant beans and corn at the same time. So it isn’t a big concern to me yet. I think there will be an open window and I think you’ll see corn get in the ground pretty quickly.”
Fertilizer a Late 2026 Story
Some in the trade have made the case that higher fertilizer prices and the inability to get the last of the fertilizer supplies in place could mean lower corn acres yet this spring.
However, Scheve thinks the fertilizer issue is more of a story for late in 2026 into 2027, yet he thinks corn acres will still fall this spring to 93 million just on the economics.
“There was too much fertilizer not purchased in Ohio and specifically in the Southern states and I think that you’re going to see farmers looking at $4.75 December corn, which is not profitable even with low price fertilizer before the war. It certainly isn’t profitable now. The average farmer in the country needs a $5.25 futures level. Doesn’t matter if you’re in North Dakota or if you’re in Ohio or Mississippi, you need that $5.25 level to break even and then subtract or add your basis onto those values to get that. I just don’t see why someone’s going to plant corn when they can look at $11.50 beans and say, you know what? I don’t lose any money planting beans at those values. I don’t make much, but I don’t want to
put corn in the ground with a chance at a 50 cent a bushel loss,” he explains.
He says if the U.S. hits trend line yields on corn than carryout will not shrink, especially as the feed estimates are too high.
Soybeans Hold Awaiting China Meeting
Soybeans corrected Monday on concerns about the developments with the Iran war jeopardizing the mid-May meeting in China.
Scheve says right now China hopes are the main reason the market has been so sideways.
“If there’s a chance that that meeting is gonna be canceled and there’s any talk that Trump doesn’t wanna fly over, I think that you’re gonna see the beans down 10 to 20 cents that day. As long as they aren’t talking about it and not talking about canceling that meeting I think the beans should stay relatively range bound between that $11.60 and $11.80 value on the nearby and that’ll probably keep a new crop right around that $11.50 level as well.”
Soybean Meal Supports
The soybean meal market is also higher on Tuesday which is supporting the rally in soybeans on meal/oil spread unwinding.
Scheve thinks that relationship between the products will hold until the mid-May meeting as well.
Break Evens Tight Around the World
Scheve says he is concerned that U.S. farmers can’t sustainably grow crops below the cost of we can’t sustain growing crops below the cost of production year after year.
“I mean one or two maybe but we just can’t do this three years in a row and it isn’t just the U.S. farmer who is having a problem it’s the rest of the world who’s having a problem as well and this fertilizer problem is going to create a real headache for the South American farmer because
their fertilizer prices are going to skyrocket. And so that should help us in the very long term. I’m not certain that it’ll help us in the old crop, but I like its chances for helping us with this new crop that we’re going to raise.”
Global Diesel and Fertilizer Shortages
He is also watching the impact of diesel fuel shortages around the world, including Australia and how it could hurt their ability to plant or harvest the wheat crop.
“That could be beneficial to wheat. I think there’s a lot of unanswered questions, and I think that the market is going to be focused on this for the time being. And even if the war does end tomorrow, next week, or even next month, that there’s so much damage in the Persian Gulf area that it’s going to take years to rebuild. I don’t think that this is a quick fix, even if the war is over. I don’t think that solves our fertilizer issue for quite some time.”
Australia also gets nearly 60% of its fertilizer supplies through the Strait of Hormuz, so that is also an issue that will impact acreage.
Scheve says in Vietnam rice is not getting moved because there is not diesel to move barges up and down the rivers.
“And this becomes a question of what’s going to happen around the world as people don’t get food. I mean, most people aren’t going to eat our corn, but it is going to be processed into a protein of some sort or our soybeans go into a protein of some sort. But rice and wheat that starts to create some issues I think that that could be beneficial to our Southern farmers here in the U.S. because they can at least cover both of those crops and that might help feed the rest of the world if this fertilizer and fuel thing becomes a long-term problem,” he adds.
