More risk-off trade overnight with a cease-fire.

Grain futures continued to post losses overnight, pressured by broader market weakness as a cease-fire was announced yesterday. Gold tumbled another $72, while crude oil fell an additional $3.00 after yesterday’s steep decline. The sharp energy sell-off followed news of a cease-fire between Iran and Israel, which has substantially reduced tensions in the region. However, conflicting reports suggest Israel may have conducted a bombing run in northern Iran after the cease-fire was announced.

Global energy prices are now unwinding the war premium that had been built in. Energy companies are likely to have implemented extensive hedging over the past two weeks amid the price rally, a move that typically encourages increased oil production in the aftermath.

The selloff in energy is weighing on biofuel-related crops and pressuring ethanol producer margins, especially with dried distillers grains (DDGs) prices sliding. Should the Israeli-Iranian conflict be truly resolved, attention will quickly shift to the upcoming U.S. tariff policy decision expected on July 9, as well as the June 30 Acreage and Stocks report. Additionally, this Friday marks first notice day for July grain contracts, and the liquidation of positions has been notable in recent sessions.

Despite lower-than-expected crop ratings, trade sentiment remains that U.S. crop conditions are generally favorable. Corn, soybeans, and wheat were expected to improve 1–2% from the previous week, but only soybeans held steady. The most concerning figure was a 6% increase in the Poor/Very Poor spring wheat category, raising it to 15%, indicating mounting stress on that crop.

Extreme heat will spread across the Midwest, beginning in the western regions and shifting east over the next 48 hours. However, the forecast calls for seasonal temperatures ranging from the upper 70s to the upper 80s during the first 10 days of July, with no extreme heat expected at this point. Hard red winter wheat regions continue to experience rain, delaying harvest, but these showers are shifting eastward and will benefit corn and soybean development. France is forecast to stay dry with heat concentrated in Western Europe, while cooling conditions are expected across the Black Sea region and most of Russia.

Cattle futures had a volatile session on Monday. August live cattle met resistance at the 50-day moving average and closed lower. August feeders initially found psychological support at $300, while the cash index drifted $0.14 lower to $310.85. Boxed beef values were mixed, with choice down $0.28 and select up $6.15.

The key risk in the cattle market remains the heavy fund positioning. The latest Commitment of Traders report showed index funds were net long 35,215 contracts in live cattle and held a record 35,858 contracts in feeder cattle, 64% larger than the previous record set in 2012. While cattle futures have become oversold relative to cash, the sheer size of these long positions may limit the upside as funds look for exits. With the cash market having peaked two weeks ago and now trending lower, rallies may continue to be selling opportunities.

As highlighted in yesterday’s newsletter, August live cattle has initial support between $204 and $206, while August feeder cattle is expected to find support in the $293 to $295 range.