Geopolitics drive overnight volatility.

A sharply higher start welcomed the first trading day of the month for grain futures, as the outside markets of energy and metals provided supporting opening, more specifically, soybean oil. Immediately after the opening, hedge selling hit corn, wheat, and soybeans. By the end of the morning session, wheat showed mixed gains, corn was steady and firm, while soybeans reflected small losses. The soybean crush spread has soybean oil now reflecting over 50% of the value.

This morning, the entire market conversation is centered on geopolitics after the US and Israel launched strikes on Iran over the weekend. That escalation triggered classic risk-driven buying overnight, with energy markets opening sharply higher. Crude oil rallied sharply on the open as traders immediately priced in potential supply disruptions in a region that remains critical to global production. At the same time, OPEC members signaled they are prepared to increase output if necessary, adding another layer of uncertainty and, subsequently, the sell-off following the sharply higher opening. As history shows, the duration of any Middle East conflict will ultimately determine how deep and long-lasting the market reaction becomes.

Beyond geopolitics, the start of a new month brings a routine position adjustment that could influence today’s trade. Updated South American weather forecasts and harvest progress will also shape sentiment. Production estimates for Brazil remain mixed, with some analysts trimming yields while others have nudged crops higher, keeping the outlook cloudy. Logistical strain is becoming more evident as well, with reports of truck lines stretching up to 20 miles at certain Brazilian ports as infrastructure struggles to handle record volumes.

With the calendar now in March, attention will increasingly turn toward US planting prospects. Conditions across the Plains are drawing scrutiny as drought concerns expand, setting the stage for weather to become a much larger driver of price direction in the weeks ahead.

Friday’s sharply lower cattle trade is anticipated to see another lower start this morning, with outside stock markets sharply lower. Fears of higher energy costs for consumers were already heightened, as the perception is that consumers would start looking to the cheaper protein cuts of pork and chicken. February live cattle expired on Friday at $232, near the lower pricing of the week, as cash cattle did mark a lower trade. The North was at $243-245, off $2-4, with the South trade dropping $5-6 lower to $244.

April live cattle broke to 232, this was valuations that were resistance last December and theoretically should be support. Any further weakness directly underneath it would open the door to 228. Likewise, spot April feeder cattle closed under significant support, it opens the door to a challenge of the low 340 range, which should initially be significant support. We have two markets out there, a cash market that is softening, while we have a futures trade that is liquidating. The two can separate much longer than equity can support. Keep that in mind, as index funds exit longs with prejudice.