Grain markets ended lower on Monday with livestock higher.
Grains Caught up in Money Flow....Again
Grain markets ended lower again on Monday seeing technical selling pressure tied to the risk off day in the outside markets. Matt Bennett with AgMarket.Net says it was a money flow day as grains were influenced by the selloff in crude oil and the precious metal markets, plus the higher dollar. “As soon as the dollar turned, seemed like some of the interest in owning commodities backed off somewhat. Obviously, there’s other things at play, but most commodities had a really tough day on Friday, and none of them look very good today either.”
Crude Oil Falls on Iran Talks
Crude oil fell sharply on Monday after Iran said it hopes diplomatic efforts to avert a war with the U.S. will bear fruit within days, according to the Islamic Republic’s foreign ministry and as reported by Bloomberg. Multiple countries in the Middle East have acted as intermediaries to exchange messages with the U.S., and Iran’s priority in talks is sanctions relief. Oil prices fell sharply in early trading today, partly because of the heightened diplomatic maneuvers. However, Bennett says that also firmed up the dollar.
Negative Reaction to New Fed Chair
The markets have also seen a negative reaction to President Trump’s FOMC chair nominee as Kevin Warsh is seen as more hawkish and could be slow to lower interest rates.
Bennett says, “Warsh was not necessarily someone that people thought Trump would pick because he’s more of a hawkish tone. And so he was not the number one pick. And then right at the end, hey, he gained odds that he was going to actually be picked. People knew there was something in the works. That turned the market, quite frankly. And so overall, people don’t feel like it’s going to be near as much as an inflationary type situation is what they were thinking before. He’s totally against quantitative easing.”
When Will the Selling Stop?
The question now is will outside markets see a bigger break or when will cooler heads prevail? Bennett says the market was betting on more interest rate cuts in 2026 and at a faster rate. “And so that’s kind of turned the mentality here,” he adds. However, he says there are fundamental and geopolitical reasons for the rally in metals and the devaluation of the dollar. “There’s a lot of unrest in the world. The flight to safety, lack of confidence in fiat currencies, those are real. And I don’t know that those are going to go away anytime soon, you know, with a little bit of war, a fear, if you will, in the Middle East, you know, I mean, there’s a lot going on, but I don’t think it’s going to go away right away,” he explains.
Will Grains Markets Eventually Benefit?
Right now Bennett says the funds are not buying grains yet even though they are an incredible value. “The thing is, is that a lot of times you see that flight to safety, ags can participate at times, but unfortunately, we just haven’t given these people or the funds, whoever you might want to think of why they would buy ags. There’s just nothing to get you excited,” he adds.
What is the Catalyst
So what is the catalyst that finally bring managed money into the grains and produced a rally? Bennett says right now weather is the only hope, because at least for corn even record demand has not been enough to spark a rally.
South American Weather Weighs on Corn and Soybeans
The corn and soybean markets, according to Bennett, were also removing risk premium with better changes for rain in the extended forecast for dry areas of Argentina. “So Argentina’s been hot and dry. You know, the good to excellent ratings on the corn in the last month have dropped some 30 percent. I mean, you’re talking a pretty big shift. Obviously, they’re excessively dry. They need rainfall and they need it fairly soon. But the forecast is showing they’re going to turn off wet next week. And it’s going to be right in the areas, particularly southern Argentina has been dry forever.” he details.
Wheat Removes Weather Premium
Winter wheat futures were also removing weather premium with reports that last week’s bitterly cold temperatures in the Northern Hemisphere did not hurt the wheat crop in the U.S. or Ukraine. “The winter kill, you know, people were talking with as cold as what it was with the lack of snow cover out west, you know, and that’s a concern. I know people out there that are still concerned about it. I certainly hope they get through that okay. Ukraine. People are talking about the same thing in Ukraine,” he says. Unfortunately, weather is the only hope for the wheat market sustaining a rally with the abundant supply.
Grains Hit Resistance, Now Will The Markets Retest Recent Lows?
Last Friday corn, soybeans and wheat also hit chart resistance areas they were unable to breach so the markets are all seeing profit taking and technical selling. So with the grain markets all testing key support areas will those be able to hold or will the grain markets go all the way back to test the lower end of the trading ranges made after the bearish January WASDE? Bennett says, “I certainly think it’s a possibility at the same time. sometimes we get a little
bit of strength in here in February you know you’re set in February crop insurance prices this just there’s really no need to buy acres there’s no need for an acreage battle or an acreage war the grower is sitting on a ton of corn. He also fears that if futures prices rally the basis will just soften.
Cattle Make New Highs For the Move
Live and feeder cattle futures made new highs for the move in reaction to last week’s higher cash and the bullish USDA Cattle Inventory report. It confirmed the smallest herd in 75 years and very few signs of expansion. Bennett says it shouldn’t have been a surprise. “We know it’s going to take time to rebuild a cattle herd. But is that going to happen? I don’t know. I mean, that’s a tough game. Someone who’s selling heifers, you know, that’s still able to get $2 ,500 and $3,000 and let someone else calve her out and feed her that’s what they want to do.” USDA Monday reported last week’s average cash cattle trade at $239.44. That’s up a solid $4.74 from the week prior’s average cash trade at $234.70.
Retest Record Highs?
Still Bennett isn’t sure if the cattle market will retest the all-time highs hit in October. “I think that you’re going to need a catalyst to really push it. You took fats, you know, significantly lower down $50, $60. You took feeders down over $80 in the case of feeders, you’re $14 off the highs. That was a massive recovery, a recovery that a lot of people are darn sure glad to see. And so my personal opinion is if you’re a fund trader, if you’re someone who was long cattle whenever a post on social media handed you your rear end, now, yeah, granted, you had big profit margins that probably just paired those back. What is your appetite for wanting to push this thing to new all -time highs? Because everybody knows this is a bullish situation. I think it’s going to be hard to get to new highs,” he says.
