Grains ended slightly lower on Wednesday with livestock higher
Grains Ease With Energy Market
Grain markets eased on Wednesday in tandem with the cooling energy markets, including crude oil says Alan Brugler of A&N Economics. He says the assurance from President Trump that ships going through the Strait of Hormuz would be safe and offered cheaper insurance helped to provide some stabilization of the market.
“I think we’re trying to figure out how much the freight situation has changed. The U .S. government via President Trump said they would provide some insurance for vessels going through there. They said they provide protection, military protection. Obviously, that’s not 100 % safe type situation. Missiles do miss occasionally. But I think the market kind of took a step back and said, well, maybe some, some to reevaluate the biofuels and the other contingent connections there.”
He says crude oil has seen a substantial rally and at current levels biofuels are a substantial part of the consumption base, so that was tied to move as well. “So, you know, you got the big jump in crude. If there’s going to be a restriction on crude supplies, then you assume the biofuels are worth a little bit more as a substitute. Energy kind of stalled out today, you know, for various reasons. I think it’s pretty clear the U .S. is not the main out -risk party here, you know, between the Venezuelan supplies that are now coming here, the domestic production we’ve got. You know, this is not a negative situation for U.S. energy. But again, if some of the Mideast supplies are going to be tied up, China’s going to be tight. They rely on a lot of their imports coming through the Straits of Hormuz. And, you know, so I think, you know, energy jumped. Now we’re kind of stabilizing to see what happens, whether people take the president up on the guaranteed escorts through the region, and then we’ll go from there.”
If Energy Prices Fall Will Grains Follow?
If energy prices continue to slide with movement of crude oil through the Strait will grain prices follow? Brugler says, “That’s definitely the path of least resistance.”
Grain Markets Deciding What War Means for Demand
Brugler says the grain markets are also trying to decide what the Iran war means for demand for ag commodities. “Yeah, I think that’s the main story here. You know, again, there’s lots of ripple effects. You know, obviously the value of the dollar plays into this a little bit. If, you know, the dollar had a tremendous run up over the last month. It extended those gains on the, on the war announcement now we’re kind of trying to stabilize that a little bit but you know the dollar index is is very dependent on what the euro specifically does it’s very heavily weighted to the euro so again a lot of factors involved here I’m not trying to duck it it’s just it’s a complex situation and i keep coming back to a famous quote in quote in the commodities markets, which is, if you trade the news, you lose.”
Will Farmers Plant Less Corn With Higher Fertilizer Prices?
The Iran war has also spiked fertilizer prices and some ships may not make it to the U.S. in time for spring planting. So will that have an impact at all on how much corn we plant or on new crop corn prices at some point?
Brugler says, “Yeah, I think it’s a background factor. Certainly there are some interruptions. The Saudis in particular have a lot of ability to produce nitrogen -based products. A lot of urea in particular, but also some of the other nitrogen products come out of the Middle East region. Those are either shut down or being stored, and if storage fills up, production might You know, so there are some supply issues there. It’s a bad timing in terms of, you know, if you’re, you want to put it on a boat now to get it to U .S. before, before it’s needed. So the longer this thing drags out, the more impact I think you’re going to have. The market’s pricing and some interruptions just because that’s what you do.”
However, he says when it comes down to corn prices, though, you know, the bigger variable is still acreage at this point. “Are we going to get the reduction in acreage that was seen at the Outlook Forum in D .C., you know, or is corn crop rotation,
the dominant decision maker here.”
Wheat Removing Weather Premium
Wheat was also removing some weather premium with rains in the soft red winter wheat areas and forecasted rains for parts of hard red winter wheat country. “I think that was probably a piece of the equation there. You did see some rain in some of the eastern, the SRW areas. The crop condition ratings showed a little deterioration in Kansas, but not as bad as maybe some people thought they might have been. So, yeah, I think we took a little risk proving about it. But we also just in the
case of Chicago, we just hit that round number of resistance at $6. That’s the highest price we’ve seen in quite a while. I think we’ve pulled some bushels loose there. Or just encouraged some of the longs to take money off the table.”
Cattle See Big Gains
Cattle had a big rally after bouncing off key support and with stabilization in the stock market. The $6.71 jump in Choice cutouts also helped.
” I think it’s fundamental. I think it’s boxed beef values shooting up. You have no cash trade yet this week. Bids at $238 were pretty much being passed. So, you You know, you look where the board is and where the cash is. And you say, you know, we were too cheap there on the board, I think, for the cash settlement. You know, you’re talking April futures and they don’t settle until the end of the next month. So they don’t have to converge. But, you know, I think the fundamentals are still pretty snug here. You just don’t have the beef production.”
Hogs Follow Cattle
Hog futures followed cattle and saw some fund buying. However, Brugler says the cash market has been holding and he is encouraged by the correction the market has staged.
“I like the underlying support on the charts on the hogs. And I think you’ve got a little bit of room to the upside there before you hit the next major resistance. The thing I’m kind of tracking in hogs is what’s going on in China. China’s,
there were some things in the news this week that China’s trying to still trying to get hog producers there to cut back on production. That suggests to me either they’ve got a problem of demand or that they’re trying to increase a little space for maybe some pork imports from the U .S. later on. You’ve got to remember President Trump and President Xi are still scheduled to meet. I believe it’s in April. So, you know, something keep an eye on. Again, I’m not trying to start any rumors
here. I don’t know which way that one’s running, but we’re watching it.”
