Corn and soybeans ended slightly higher, with wheat, cattle and hogs mixed.
Soybeans Bounce on China Meeting Confirmation
After selling off Monday on concerns about China canceling the April summit in reaction to the U.S. attacking Iran, soybeans recovered on Tuesday. Ted Seifred of Zaner Ag Hedge says Trump administration officials confirmed there were high level trade meetings taking place next week between the two countries as a precursor or the April summit in Beijing between the two leaders.
“Yeah, I that that’s a big part of it, you know, even going back to a little over a week ago where there was reports from one of the Chinese news agencies that, there wasn’t a whole lot of optimism on what was going to go on in that meeting later on in the month. Then with the conflict starting over the weekend, we know that, it’s one of Chinese allies, one of the Chinese partners, and that they didn’t want that to happen. So now that renewed fears that this meeting either wouldn’t take place or wouldn’t go well. But there were some reassurances on that really overnight going into the Tuesday session. So the market did feel good about that.”
He says soybeans and soybean oil also got some buying interest tied to the strength in crude oil with the conflict really dragging out. “A lot of infrastructure facilities being attacked. Also, the shutdown of the Strait of Hormuz, which is a really big deal. That’s a massive amount of the world’s crude oil goes through that. So that strength and energies lent over to corn and soybeans early on.”
Corn and Soybeans Traders Still Assessing Iran War Impact
However, he says corn and soybean traders are trying to assess what the war in Iran really means for ag commodities.
He explains, “It’s tough to say because we have the energy component for ethanol and biodiesel, but then we also have the concern of demand destruction and things that happen to global economies when we have conflicts like this. And also, you know, a new trade tiff with Spain potentially, who has been a pretty good customer of ours, at least, you know, this marketing year. So you’ve got a lot of conflicting factors that are happening right now. And you’ve got markets that are really trying hard to decide, you know, which factors are going to matter most of how long things like this are going to last. And there’s just a lot of unknown and a lot of uncertainty. Whenever
you have unknown and uncertainty, you have nervous investors, specifically your speculative portion of the market. So their move can change by the hour.”
War Usually Friendly Grains, Inflationary
War in the past has been friendly for the grain complex with the most recent account when the Black Sea war broke out in May of 2022 and sent the markets shooting higher with wheat leading the charge. Also at what point do the managed money traders buy grains as a hedge against inflation?
Seifried says, “Well, energy inflation is a thing, but it’s not something that’s really calculated into actual inflation. And we can debate that for hours, whether that’s the right thing or not. But, you know, when we talk talk about inflation, that’s,
that’s, you know, minus energies. It does have a positive effect on both corn and soybeans, obviously, because there is a large energy component on the balance sheets of both corn and soybeans. But as far as everything else is concerned, when you
have high energy costs, that’s generally negative for the economy.”
He says in years past, even during World War II, the market saw war as being a very inflationary thing. Seifried agrees, “It’s actually how we got out of the Great Depression. However, the reason for that is because we employed a lot of troops and we paid them lots of money and they had money to spend on goods and things like that, especially after the warhead concluded. It’s not the same thing anymore, Michelle. These wars that we fight nowadays are a lot more tech -oriented. They are not personnel -based, as they have been in the past. And so, yes, it does cost a lot of money. We use a lot of resources in times of war. But we’re not injecting as much money into the economy as what we used to think war or wars in the past,
right? So we don’t see the dollar sharply lower based on this. We actually have the dollar sharply higher on Tuesday. And you have things like, you know, equities markets that are under pressure, partially because of the strength in energies. So
these sorts of things send a lot of mixed signals when it comes to inflation. But the signal that we were getting on Tuesday with a fairly sharply higher dollar was more of a deflationary signal than an inflationary signal.”
Why Isn’t China Mad at the U.S. About Iran?
The U.S. has now cut off two of China’s main and cheapest sources of energy, Venezuela and Iran. So why isn’t China mad at the U.S. and why haven’t they threatened to cancel the April summit?
“Yeah, that’s a great question, Michelle. And it’s hard to say if they are mad at us or not, because if they were, they wouldn’t say it. That’s just sort of how they operate the culture. And so I don’t know. We might be walking into a meeting that doesn’t really go anywhere. Or we might be walking into a meeting where they’re overly nice and accommodating in order to maybe see if they can get their way. So it’s very difficult to anticipate how China is going to play things on a global scale and what the optics is that they want the rest of the world to see. For the moment, we are feeling fairly optimistic that that meeting can happen, will happen, and could bear some fruit. But again, this is something that can change on a daily basis.”
Are Sunday’s Highs in Grains Going to Hold?
Corn, soybeans and wheat had higher monthly closes last Friday and then saw a big gap higher open on Sunday night in reaction to the Iran conflict escalating. Soybeans even took out the November highs. So are these highs going to hold for a while?
Siefried responded, “I don’t know. A lot of that depends on what happens with everything that’s going on in the world. And a lot of that depends on what happens with this meeting later in the month. But it is a different feeling this year than it has been the last couple of years from the main standpoint there being how the funds were positioned in corn. Funds were really long corn at this time of year last year and really long in corn in in January they were short coming into the month of February they’re probably closed the flat now I would say but they were holding a short position rather than a pretty large long long position. This feels like we could be due for a much more seasonal type year for corn, meaning we don’t put our highs in January or February. We’ll put our highs in June, July, time frame. And I don’t think we have a whole lot of weather risk in these markets right now, especially the corn market.”
He says corn still needs to get through the second season safrinha corn crop in Brazil with Mato Grosso planting pace is at over 80%. “So they’re getting it in, but they’ve gotten it in not as fast as they had the last couple of years. So that pushes them further into that danger zone of the dry season, the hot and dry season that comes at the end of the second season plant or second season safrihna crop. So I think there could be weather premium at some point that has to come in for that. But we also have our plants and we also have our growing season and I just don’t feel like that weather premium is in there.”
Does Managed Money Go Long Corn and Wheat?
The corn and wheat markets have both seen funds cover a major portion of their short position, especially in wheat where they had been short for nearly four year.
“That’s a great example of what can happen when we’re leading into a conflict. And you have a commodity (wheat) that does have some exposure to the area that that conflict’s going to be in. And you had funds that have been short, at least the Chicago wheat contract, since 2022. But then leading up to this, they didn’t want to have that risk. So they get out of their risky positions. They basically go flat in wheat. But you saw right about where we were estimating the funds to be flat, that buying dried up in a hurry. Now, part of that could be sort of buy the room or sell the fact or just the uncertainty of leading up to something versus it actually happening.”
However, he points out the global fundamentals haven’t changed much. “We have a big wheat or a very reasonable carryover from a global scale. We have a very big 900 million bushel carry over domestically. It’s hard for me to have a fundamental
justification for extended rally in wheat. But by covering the shorts that they did in the wheat market, that really did kind of change for wheat. And, you know, these are technical traders, Michelle. So they have, they may have created a scenario for
themselves where they have bullish buy signals on a chart. And if they’re technical traders, it is possible for them to go along. But I don’t think it’s fundamentally driven.”
Cattle Futures Rebound Off Support
Cattle futures plunged early in the session with the stock market selloff but rebounded with as the DOW and S&P came of their lows. Live cattle also got some help from a $6 jump in Choice cutouts at noon and closed higher, back above key support at the 100-day moving average. So will that chart support hold?
Seifried says, “Wow the last two days look really good for that, Michelle. And, you know, it’s actually kind of the opposite conversation that we were having with wheat, right? You had speculators that were short wheat going into a conflict that they didn’t know how that was going to affect that. On the other hand, Thursday and Friday were big heavy days for the live cattle because speculators were really long live cattle and didn’t know how that was going to affect things. So they sort of got out of that position but I think now that the conflict is started you think about about live cattle beef in particular we do export some beef but it’s mostly a domestic market.”
Cattle were also able to claw back with the recovery in the S&P and close above key support. “And so you had that hold of the 200-day moving average on Monday, closed back above the 100-day moving average on Monday. Then on Tuesday, we were back down below the 100 -day moving average, but closed back above it again. That’s a pretty good sign that at least for now, we’ve found some solid footing underneath us.”
Will Hogs Hold Too?
If the cattle markets hold will hogs do the same? Seifried says the hogs are treading water, waiting to see what happens with the Iran war.
“But I think I think hogs have maybe just found a value area, right? We had, you know, we had the longer term bull market, then we had the big correction off the highs, then we corrected the correction, and now we’re just sort of trading in the middle of that range, waiting to see where to go next. But I think what it’s saying is that given everything we know at the moment, I think the hogs have sort of found that sort of fair value. And again, waiting for the next shoe to drop, which by the way in everything that we’re talking about, Michelle, that shoe can drop at any given moment.”
He says its more volatile than a weather market because. “In a weather market, at least we know when the forecasts are coming out. In this climate, we have no idea what the next big news story is going to be coming out of the Middle East, and we have no idea when or how that’s going to be delivered to us. So, again, things are changing very, very quickly and can change very, very quickly. And these can be, you know, everything that we’re talking about or thinking about in the markets today, it could be very, very, very different tomorrow. So you’ve got to be nimble. You’ve got to be on your feet for this one.” Y
