The US and Iran are to sign an MOU on Friday if it holds together. And then it’s only a 60-day agreement.
Grain Overview
Just ahead of market openings last night, it was announced that Iran and the US came to MOU agreement that for some reason, (which can allow for revisions and arguments this week) will still not get signed until Friday. This caused a sharply lower opening for crude oil while equities and metals moved sharply higher. The obvious reaction by the grain trade was to again move into a softer trade mode. There’s plenty of rain throughout the Central US, but there are rising concerns that western and central Europe are entering into a drought.
If the MOU agreement holds together into Friday, the signing will occur in Switzerland, with the anticipation that the Strait of Hormuz will flow freely. Unfortunately, industry sources say it still will be several months until movement will be back to pre-war levels. Considerable repairs will also be needed at numerous golf facilities. In this agreement, it’s fear that Israel may still throw a monkey-wrench into it, has it is not happy with some of the terms, and is having difficulty restraining itself continue to fire upon Lebanon, because when they cease-fire, Lebanon continues to launch attacks into its country. Look for daily continual headlines that cause the weakness in crude oil to become choppy from last night’s losses, while equities will likewise ebb and flow from headlines. This peace accord runs for 60 days, and if the Iranian hardliners irritate Pres. Trump, he is indicated that the US could restart the war on Iran.
US weather is mostly favorable, with several regions of the Corn Belt seeing weekend rains. These also brought cooler temperatures to the Corn Belt. There remain trouble spots in the corn crop though, with heat and drought impacting the West and excess rain an issue in the East. While these are causing some crop stress, they are not enough to counter the managed money liquidation we are seeing.
It appears as though this will be another week of headline driven markets. Given the lack of fresh news for the commodity complex this is not uncommon. We will see the regular list of reports this week, along with the May NOPA crush report today, the Fed Reserve meeting tomorrow and Wednesday, and the cattle on feed report Thursday. This will be a short week of trade as markets are closed Friday for Juneteenth. A big headline factor will be when China announces the reduction of its 10% tariffs on soybeans, and 15% reduction on grains. This would be the unknown wildcard coming up to cause a switch in demand thoughts, as the pervasive bearish trade action is that none is forthcoming.
Cattle Overview
It was a mixed week for live cattle while feeder cattle had shown gains to end the week. The cash feeder index picked up $6.63 on the week and went out at $368.01. Meanwhile negotiated Fed cattle trade held until late week with sales and North being steady to lower by $1 at $255-2056. Sales in the South were also steady-$1 lower at $256.
JBS announced Friday the planned closure of two facilities in Pennsylvania and Tennessee. One is a beef production facility in Souderton, Pennsylvania (a suburb of Philadelphia processing 2000 head per day) and the other a value-added facility in Memphis, Tennessee.
Father’s Day is this coming Sunday, and procurement has already been established for stocking shelves this week. Demand seasonally softens now into August, with the June contract still showing a soft trade into the end of the month, while August maintains a discount of over $14.00 into the end of summer.
On the charts that we show, August live cattle have support near 234, while resistance is 247-248. August feeder cattle are struggling at 360, with the next resistance point at 366. Meanwhile support was established last week at 349-350. A major low in feeder cattle were set in early June at 336 on the NWS announcement, with seasonal price outlooks for feeder cattle higher from early June into early July.