Grain and livestock futures were leaning higher on Wednesday morning.
Grain and Energy Markets Trading Headlines
Grains markets were slightly higher on Wednesday morning despite a pull back in the crude oil market on news the U.S. and Iran were working on a one month cease fire as the U.S. is reportedly constructing a 15-point peace plan for Iran to consider.
Jamie Gieseke with Paradigm Futures says the crude oil market fell with the news as it is still chasing headlines.
“We’re getting information coming from the powers that be and saying, you know, we’ve declared victory or we’re doing a ceasefire. And then on the other side, we’ll see something about, you know, there’s been no talk of a ceasefire. So we’re getting conflicting messages there. But what we’re also dealing with is an actual physical market, right? What does it take to purchase a barrel of oil? “
He says that has created a gap between U.S. and world energy prices.
“You look at Dubai oil trading around $160 a barrel. Omen oil, $152. Rotterdam, $112. All while the Brent crude oil market is trading around $95. So you have this huge spread. Market participants are having a hard time dealing with it. And this is just that headline phase that we’re seeing.”
Inflation or Stagflation?
Still, funds bought crude oil on the rally and also bought corn and other grain futures. So is this an inflation play?
“And I like to go back to, you know, when we get our inflation data reports last week, we had a PPI or the producer price index, and we saw it was very subtle, but the report comes out at 7:30 am Central Time and energies and grains were a little bit soft going into that data release. And then it came out, the data was hotter than anticipated and grains and energy started to rally out of that. It was very subtle,” he explains.
He says after the PPI data the stock market fell. Not on concerns of inflation but stagflation.
“So it kind of reminded me of what a lot of analysts are saying is stagflation trade. They’re saying at the end of last year and the start of this year. And just seeing that market reaction to that hotter inflation data reminded me of the stagflation trade.”
There has been rotation out of tech stocks into more hard assets. Metals did not see that because they were already overvalued, but grains are not says Gieseke.
“Well, grains and energies are known to be a little bit undervalued here relative to what’s going on.”
What Kind of Environment Brings More Money Flow Into Grains?
So to keep that money flow going into the grains, what kind of market environment is needed? If the war is over and crude oil keeps going down will it drag the grains down with it?
Gieseke says, “We’ll see. You know, we talked about a headline phase. The next phase is actually a data phase. So what do we mean by that? Well, the head of the IEA came out at the end of the last week, beginning of this week. He’s notoriously bearish, talks about oversupply and demand weakening. Basically, the entire 2025, he was the guy. But now, last week, and it started this week, he said this has potential to be the largest supply shock in history. He’s comparing it to 73 and 79 combined and says this might even be bigger so moving into the data phase.”
He thinks the energy markets will be waiting to see the various reports released in April including the EIA monthly report, OPEC report and the IEA report.
What Price Do Grains Need to Be At?
If the energy markets are trying to figure out what price level they need to be at, is the same thing kind of happening in the grains?
He says, “Right now, the grains, especially old crop corn, they’re struggling with a weak basis environment. A lot of that just has to do with, we did catch a rally and a lot of farmers had to catch up selling their corn, right? We caught a 50 cent rally here off the Jan low and farmers used that to play catch up on sales and get some cash flow here before planting season.”
He says the corn market needs to work through that if basis is going to improve, otherwise the next best opportunity for corn to move higher is a problem with the second crop corn in Brazil.
“In Brazil 20% to 25% of that crop was planted late outside of the ideal time frame. So there is there’s a risk there. The last few years,
we’ve been blessed with good Brazilian second crop corn. This year, there might be a risk there that the crop gets trimmed pretty good,” he adds.
Biofuels Push
The higher crude oil prices have also ramped up the urgency to get biofuels policy moving in the right direction with an E15 announcement from EPA on Wednesday and the RVOs coming by the end of the month.
How supportive will that be to the corn and soybean markets? Gieseke says it will be supportive and the technicals are already suggesting that.
“I do feel like it’ll support the market. Why I say that, I’m a heavy technical guy. We’re above all moving averages now on old crop corn.
We even have the 100-day above the 200-day. We got the 50-day pointed higher, a series of higher highs, higher lows. A positive headline, like something that we could see here this afternoon, would certainly add to the fundamental support. I think we’re still going to struggle short term with just heavy cash values in old crop corn. So we’ll see.”
Why Farmers Should Ignore the Headlines
Gieseke says the market is also positioning ahead of the USDA reports next week but he thinks farmers need to try to shut out the noise and quit watching the headlines.
“What we want to avoid happening is letting these short-term major data releases kind of force our hand, just like the January 12th report. I mean, if you don’t have some sort of short-term protection going on into those reports, you know, you could have a bullish bias going into the report. And they might be bullish. Or in the case of Jan 12th, it was extremely bearish. But it’s more of a one-time price reset. And then the market ends up rallying anyways. You might have got blown out because of the one-time price shock. So it’s important to just position yourself, understand what you can handle with a major market move like that and just position accordingly.”
