Outside Markets Take the Wheel as Geopolitics Raise the Stakes

Other major commodity markets were big influences today as gold and silver hit new-all-time highs and crude jumped to new 6-month highs with the major catalyst for all three markets the escalating political and potentially military problems in Iran. With the Federal Reserve not raising rates on Wednesday but highlighting inflation concerns, the raw material sectors are all rallying on a partial combination of those two factors. Raw material inflation would help grain and soy prices, but those together will not start a sharp leg higher. Prices again tested the weekly highs in early trade after President Trump’s vocal support for year-round E-15, but farmer hedging capped the rallies as November beans again stalled at $11. Friday’s trade will follow the political news as further world turmoil will continue a flight to safety.

News and Notes:

• S Brazil and N Argentina saw their forecast rain start falling overnight with more consistent chances forecast in the 7–10-day forecasts. A non-stressful end to the growing seasons in both Brazil and Argentina could push SA’s total bean crop over 8.6 BBU with their total corn yield closer to 7 BBU. Modern seed genetics just do not offer many yield surprises when the weather is above average.
• The daily November bean chart is on Page 2 and shows this week’s push through the last technical moving average resistance at the 50-DMA (green line) and settle above all four of the major moving averages for the first time since early December. While prices are 40-cents lower than then, the technical strength is signaling some unexpected technical strength that has forced the heavily short speculative funds into big volume short-covering. With the funds now long 150 MBU of beans, after dipping into a small, short position in early January, the funds are positioned to get more bullish beans if some positive news develops.
• The president of the National Cattle Association warned that it is just a matter of time before screw worm is found in the US cattle herd. He believes birds and other migratory animals will bring it in, rather than infected Mexican cattle. He is not concerned that it can and will be dealt with and kept under control by the industry but is a reminder that we may be re-opening the border for feeder and processed cattle, sooner rather than later.
• The weekly export report was a little disappointing with all three major markets sales within estimates, but corn still saw over 60 MBU of weekly sales. The frigid US weather has frozen major waterways which has pushed up shipping costs to world buyers and pushed up the cash price despite only a modest rally in futures.

Keeping up with all the cross-currents that move the grain and soy markets is challenging enough but when you start to add in the unpredictability of President Trump’s messaging and understanding constantly unsettled world political landscape, your brain begins to hurt. The positives from today is that higher crude oil and gas prices will help ethanol and bean oil, but Iran’s potential exclusion from the world wheat import market would ultimately be a negative for world wheat demand. In between Iran’s fragile government control and the US’s recent takeover of Venezuela, market volatility and uncertainty would get even worse. World supply and demand remain important parts of price discovery, but eh outside markets are gaining importance with each passing week.