For the 6th week in a row, energies higher Sunday night, stock indexes lower, then reverse.

Futures are opening the week in a familiar fashion, with trade once again reacting more to geopolitical developments than to fundamentals. By the close on Friday, the market had been leaning toward the idea that tensions in the Persian Gulf were easing. That view did not last long. Weekend reports of Iran targeting ships in the Strait of Hormuz, along with the U.S. seizure of an Iranian vessel attempting to leave the area, have quickly shifted sentiment back toward risk. Although the U.S.-Iran ceasefire is not set to expire until Wednesday, the latest escalation suggests the market is already questioning whether it will hold for that long. As a result, buying interest has returned overnight to the sectors most exposed to supply risk, with energy markets leading the move and agriculture drawing spillover support.

In grains, wheat has taken the early lead. The market is starting to deal with the reality of shrinking planted area worldwide. Australia remains the primary focus, where wheat acreage is now expected to fall to its lowest level in seven years. Elevated fertilizer costs continue to weigh heavily on planting decisions there, and for now, there is little sign that input pressure will ease. Also, the lack of availability is a concern for Brazilian wheat production, which is already going to see its acreage down, along with India sourcing fertilizer for the upcoming rice planting and then wheat planting as well.

Weather is also beginning to command more attention as U.S. planting advances. Ongoing dryness in the western Plains remains on the radar, while parts of Kansas have dealt with an overnight freeze Sunday morning, which will be followed by a hotter, drier pattern. This hot, dry weather will expose any freeze issues, causing next week’s condition rating report to collapse. At the same time, areas farther east are contending with too much moisture. In a broader sense, the April planting pace is not yet a major concern, especially with national progress still running ahead of normal. Even so, when the market has limited new material to trade, smaller weather stories can still generate an outsized response.

On a technical note, overnight Kansas City wheat created a quadruple top against the March highs and last week’s high, and quadruple tops really hold. Look for whatever pullback developed overnight from that level to find new buying with this afternoon’s crop ratings and ongoing forecasts of dry weather. Of course, this morning, the weather gurus are again trying to see moisture late next weekend. When you cry Wolf long enough, eventually you get what you expect. The problem is, when that rain finally comes in such an extreme drought, it’s just a light shower. 

Farmers in Kansas need rain now. In my tour over the weekend, they were even delaying fieldwork waiting for moisture. I drove 720 miles over the weekend and saw five farmers working in the fields.  I will have photos in a video for the newsletter this afternoon I will produce, of areas of Kansas that are suffering.

On corn, the safrinha corn crop needs more rain and was planted late. It risks entering the typical warm/dry season without new shots of rain, and crop yields could be curtailed. This could take until mid-May before the trade becomes worried.

Friday’s cattle on feed report came out neutral to trade expectations, and part of the selling on Friday was rumors of a leaked report that implied it would be negative. That should bring in some buying food influence against the outside markets which would normally suggest cattle and feeder cattle will open lower today.

Cattle sales last week were steady, mostly with northern sales down $1 at 248, while the southern trade was steady at $248. Cattle slaughter was 514,000 head, again from the prior week of 2000. Still, our year-to-date slaughter is running at 90% of last year and the smallest since 1990. Imports early in the year are large, but after that, we start to see quotas kick in, which then apply a 25% tariff.

On the charts, both live and feeder cattle posted key weekly reversal lower patterns. This implies, technically, that rallies should be sold, even though seasonally it is difficult to be short feeder cattle from now into June. Resistance today on June cattle is 248.50-249, with support at 243.50, and major support at 241.50. In August, feeder cattle, 368.50-369 is resistance, with 371 major resistance. Support is Friday’s low at 359.00-359.50. Major moving average support is at 356. Welcome to high volatility, which never goes away.