Grains are lower early Wednesday with livestock higher.
Grains Set Back With Easing Energy Prices
Grain markets were lower on Wednesday morning as Rich Nelson of Allendale says they are seeing spillover from easing energy markets. President Trump posted Tuesday afternoon the U.S. would be providing safe passage of ships moving through the Strait of Hormuz taking away that choke point and adding some certainty to the markets.
“Effective IMMEDIATELY, I have ordered the United States Development Finance Corporation (DFC) to provide, at a very reasonable price, political risk insurance and guarantees for the Financial Security of ALL Maritime Trade... If necessary, the United States Navy will begin escorting tankers through the Strait of Hormuz, as soon as possible.” - President Donald J. Trump
Nelson says, “Keep in mind, markets are not looking for a final ending to the war or anything like that here. What they’re looking for is finding the maximum psychology point. And then saying, once we priced in the psychology point, and then we can let off some of the hot air. And perhaps, as you mentioned here, maybe with a little changing viewpoint regarding that Strait, regarding the situation overall, regarding the fact that Iran’s missile launches are now down about 70% from the prior two days. Perhaps now we are past that largest psychology point and maybe finding a more stability here, which does give us a live influence on the grains as well.”
Historically War Has Been Positive For Grains
Normally war is positive or grains but it has been caught between higher energy markets and the higher dollar. Plus Nelson says add in some uncertainty on biofuels policy announcements later this month. “Plus, we have a meeting mid-month between the U .S. Trade Representative and also the vice premier in China. And still in place, the end of the month trip is still lined up for Trump as well to Beijing. So there’s a large amount of questions and all of these are certainly not getting answered right now in the very short term now.”
Soybeans Await China Meeting, RVO Levels
Soybean futures are awaiting the meeting between President Trump and Xi to see if there is an extra 8 million ton old crop buy here from China because it will make a big difference in prices.
“If China buys on top of what they’ve already done, prices will probably push well past $12.30. On the other hand, though, if we do not get this deal, we do not get the extra buying. Our model suggests soybean pricing might see a little dip here into spring, perhaps down to $10.62 before stability is seen here. So we’re stuck now in between a rock and hard place, so to speak,” he adds.
The soybean oil market has also been hitting new contract highs with crude oil and the surge in diesel prices. However, it is also building in optimism on biofuels policy and some of that is already priced in.
Nelson says, “In our viewpoint, maybe about 70 % of the general story, and now the market is wondering about the remaining 30%. And that remaining 30 % is going to depend on the quantity that they give us as far as requirements. So the quantity billion gallons. Also, a question here for us is what the imported oil stock will be penalized or not penalized with. And then third factor will be what the large plant offset is required for the small plant waivers, which were introduced last year. So at this point, we’re waiting on the facts to dial in the rest of 30% gain here.”
Corn Also Sees Farmer Selling
Corn is easing back with soybeans, wheat and energy markets but also ran up into chart resistance the last few days around $4.50 on May futures. At that point there was also a pick up in farmer selling. However, Nelson says the balance sheet is still just too burdensome for the market to get a big rally.
” This large old crop balance sheet, now it’s not as large as some of the exceeding the large years, but this large old crop balance, does limit how much upside we have in this corn market. So we’ve retraced about 50 % of that prior large down move from November, but we really need to fix this balance sheet in a serious way to justify further prices past this point. Keep mind for corn, we are behind the general needed goal for corn for ethanol, and we’re behind by about 50 to 80 million bushels. So that could be added back up theoretically onto the stock numbers. Now, we’re not going to see USDA do that on Tuesday because they’re still waiting on biofuel policy numbers and then they’ll make their adjustments. But the point is, if we do not get what we hope to see out of the biofuels story, perhaps corn can had maybe a few extra bushels back to the ending stock side and we might see some lower crush,” he says.
Higher Fertilizer Prices Stifle Corn Acres?
One thing that could help with the burdensome corn situation is less production for 2026 and with fertilizer prices rising further due to the war in Iran it brings up the question of whether or not farmers will plant even less corn?
Nelson says it is possible. “Now, we don’t know exactly how much, quote -unquote, last -minute switching could be seen based on changes for soybean prices, based on changes for fertilizer pricing, et cetera. So these can give us some type of movement. We’re not quite sure how much. But theoretically, maybe are we maybe losing a few extra corn acres right now? I think we can make that point. Whether it’s enough to substantially change the story, that’s maybe a separate
argument here.”
Wheat Setting Back with Rain in ECB
Wheat is also consolidating and seeing some technical selling with the recent strength in the U.S. dollar but it may also be removing some weather premium. Rains in the soft red winter wheat areas have already provided some much needed moisture and there are forecasts for rain in the hard red winter wheat areas of the Southern Plains.
“Last month’s Climate Prediction Center forecast for spring rains, they gave above number rains for the soft red area, Illinois, Indiana, Kentucky. And for right now, this forecast does give those rains as well. So we’ve solved concerns for the Chicago contract. For the hard bread contract, for the KC, we have some kind of mixed arguments here. Oklahoma and Texas, they’re going to see two to seven inches, but we’re missing most of Kansas. We’re also missing most of Nebraska in the system here I had here.”
Cattle Rally With Boxed Beef, Stock Market
Cattle futures are soaring on Wednesday with some stability in the stock market and a $6.71 surge in Choice boxed beef.
Nelson explains, “Keep in mind, You know, we added, what, $13 to wholesale beef last week, $8 so far this week. So there are arguments that perhaps we can stabilize cash cattle. Maybe not exactly rally it, perhaps stabilize it, though. All right. So product values have helped stabilize the market.”
And he says consumer demand has show little sign of wavering.
“I’ve computed through the fourth quarter at least so far, we despite several, several questions these few years about the U .S. consumer, we continue to be astounded that so far the consumer has not seriously pushed back against beef. So until we actually see it happen, we’re not going to forecast it happen here just yet, though.”
Nelson says last week’s futures market correction was also warranted with extreme beef processing losses but was overdone.
“As a reminder, last week, Cargill did announce lower hours across the board. As a reminder, we also have our questions still in front of us about the JBS possible strike. So there were valid reasons for last week’s sharp break. But was it reasonable? And certainly with our question regarding beef demand, which has somehow been so resolute, perhaps we overdid it on the downside of the short term.”
Cattle Bounce Off Chart Support
Live and feeder cattle futures also held and bounced off of key support areas on Monday and Tuesday even with the melt down in the stock market. So he is impressed with the resilience of the market.
“And keep in mind here for this general sharp, sharp uptrend, the cattle had been in prior, we are still in the upper third of this uptrend. We really haven’t challenged a lot of the major support points on the charts, and we’re still holding a lot of premium. So we have stepped off major highs, certainly true. The question right now is what’s lined up here these next few weeks and next few months, as we still have a tight supply with us for about another two to three months in front of us here.”
Lean Hogs Rally With Cattle
Lean hog futures were higher with cattle and fund buying. Nelson says the market has recovered around half of the recent loss from the new contract highs.
“In terms of can we get up the rest of the amount, I’m not quite sure. We have these questions regarding disease pressure, which hits summer and early fall supplies, but we don’t have confirmation that those are actually true that in terms of actually seeing numbers come out of these barns at lower numbers out of the balance are not the barns overall. So we have questions. We’ve added a little premium into these back months, but really we can’t argue a lot more. In the near term, we’re perfectly balanced between supply offered and demand for that product. You know, we’re running cash hogs and pork just a little higher price than last year. That’s okay. And our slaughter numbers are very close to last year numbers. So overall, there’s maybe some questions for summer, but for right now, this market is quite perfectly balanced here.”
