Grains were lower early Wedneday, with cattle two-sided and hogs higher.
Grains Retreat
Grains were sharply lower on Wednesday taking back most of the gains from Tuesday.
DuWayne Bosse with Bolt Marketing says with the reports out of the way the grain market has gone back to trading Iran war headlines and following the crude oil market.
President Trump said on Tuesday the Iran war was nearing the end which sent the stock market sharply higher and crude oil lower and that trend is continuing on Wednesday.
Bosse says, “President Trump this morning is kind of talking about we might be out of Iran within two, three weeks. Iran mentioned something yesterday afternoon about they want to end the war, but on their terms. And I’m like, well, what are those terms? You know, so there’s still a lot of questions out there. But I think obviously President Trump doesn’t like to see high energy prices and the stock market lower. So I think he wants to end the war as soon as he can.”
Is the Grain Rally Over?
So if the war is nearly over is the grain rally also done?
Bosse says the U.S. can’t really leave Iran until the Strait of Hormuz is reopened. Iran wants a cease fire but that may not happen until the Strait is reopened.
Plus, he says it will take a while to get crude oil production back to normal due to all the damaged energy infrastructure in the Middle East.
“I mean, we had these huge records amounts of oil and supply beforehand. We were at $55 and really looked like there was no reason to rally. Stop that straight from flowing and then you damage infrastructure and the price is going to stay higher for a while. I think crude oil we could end the war tonight when Trump speaks maybe he’s going to declare victory and we’re leaving. That could mean lower crude oil futures but I see us at $85 and higher probably all summer,” he explains.
If Crude Oil Prices Stay Elevated Will Funds Stay in the Grains?
Funds have been buying grains the last month with the higher crude oil prices and fear of fertilizer and fuels shortages, plus rising inflation.
If crude oil prices stay elevated will that keep the funds defending that position in the grain markets?
Bosse says, “I think so especially with yesterday’s report. I don’t think there was anything in that to really scare them out of their long positions. Even if the war is over I think energy prices and transportation costs stay high and that should support grain prices.”
On top of that there is some fear about shortages of fertilizer, seed and other inputs that could Bosse says could rally the market yet.
Do Corn Acres Fall From Here?
USDA’s Prospective Plantings Report did show 1 million more acres of corn than expected but yet at 95.3 million acres, that is still 3.5 million less than last year.
With the concerns about fertilizer and other inputs will that trim acres further?
“Everyone’s figuring out that. The trade estimate was a little bit too low anyway because I think we were getting ahead of this problem with fertilizer prices spiking. We’ve got to remember when these surveys went out March 1 you know the majority of producers actually answered it that day and back then the war was just getting started. So, I don’t think we’re seeing any acre shift yet. This winter seed companies said everyone wanted to plant corn.”
Principal Acres Low
Bosse is also concerned that total principal crop acres at only 310 million were down 1.5 million acres from last year and corn and soybean acreage was right at 180.
“I think both of those end up north of that. So here we go again, like last year. I feel like the June report could be a bearish surprise with more acres. I just hope we find out those acres in June and not January this time.”
He says the only thing that could change that is weather and possible prevent plant.
“But to me, to be 310 million acres, principal crop acres, you’re going to have to prevent plant really high this year. And I don’t see that happening.”
Fear of Fertilier Shortages?
At the same time farmers are starting to report that they can’t get fertilizer, even the tons they booked ahead or paid for.
Bosse is hearing the same thing. “Elevators, co-ops may think they have fertilizer booked and coming, but we’re hearing some rumors that they’re not sure if they’re going to get it or not now. It’s funny, yeah, some of these boats in transit that had gone through the Strait before the war began were headed this way, right? Money talks and I wouldn’t doubt if some of those boats got shifted and moved around a little bit. So I’m a little concerned about that. You know, obviously to even book fertilizer prices now, nobody can really guarantee anything. A lot of it’s like, we’ll see what the price is when it gets here.”
Will Soybean Acreage go Up?
So if corn acreage comes down has the soybean market seen the lowest acreage in the March report especially if the U.S. and China strike a trade deal?
“Yeah, I think that soybean acres number will increase moving forward. Obviously, that meeting between Trump and Xi is going to happen here in a month, and especially if the war ends. So that’ll keep the funds wanting to be long. The soybean market will kind of keep this premium in it that I don’t know if we truly need unless they buy our old crop,” he adds.
And Bosse thinks the China deal could be a new crop story for soybeans but not old crop and even then he’s skeptical.
“Our government has promised that they’re going to buy 25 million metric ton moving forward. If they’re going to do that now is kind of the time they need to start doing that. So that’s kind of still what I’m looking for in this meeting is for some sort of large purchase but it’ll probably be new crop not old crop and i don’t really know if that’s bullish the soybean market anymore,” he states.
If the U.S. doesn’t get any of the 8 MMT of old crop business President Trump has declared then Bosse says ending stocks are too high.
“I think we’re going to have to raise our ending stock, lower the export demand, 100 million bushels, maybe 130 million bushels.”
USDA Report Response Rate
The farmer response rate on the USDA report was only 37% and Bosse says that is a problem.
“From what it looks like, it looks like it’s historic low. I see on social media some talk about, well, Farmers don’t like to report because all USDA
does is make the market go down. And I’d really encourage producers to fill those out. But I think I might know what the problem is. We farm as well. And we received our survey in the mail the exact same day it was due. Luckily, I’ve got a partner that’s on the ball. He opened it up and did the survey online. So we participated in it. But I wonder how many producers out there can be lazy like me and don’t open mail every day. If it’s two or three days later, they missed it. Maybe there’s some adjustments we can make from NASS and USDA to get these surveys out sooner so farmers have time to participate in it. But we want farmer participation in this, Michelle, because if we don’t, then it’s just private companies giving out their own numbers and surveys.”
Cattle Pushed by Technical Buying and Cash
Live and feeder cattle futures were two-sided early but made new highs for the move on Tuesday and filled the chart gap areas from last October. If those technical areas can be breached to market could make new highs.
Bosse says the market has been driven higher on technical buying and strong cash and the rally in the stock market didn’t hurt. Showlists are smaller again this week so tighter supplies are driving ideas of higher cash again.
But he fears higher gas prices could eventually hurt demand if they stick around all summer.
Reopening the Border to Mexican Feeder Imports?
The cattle market has also shook off reports over the weekend that USDA Secretary Brooke Rollins is considering a staggered reopening of the border to Mexican feeders starting in Arizona.
“So they’ll start in the West, I think even along the Arizona border, and they won’t open it to the East where really that’s where all the cattle flow across Texas border, of course, until later. But just the fact that within two, three weeks, it sounds like they’re going to make this announcement that this is happening. I would have thought we could have been down seven bucks or limit on news like that. But here we are rallying,” he says.
