The Iranians pull a "Zelinski"

The grain trade is higher this morning, as oil prices again pursue the 100.00 mark, as Iran pulled the suspected “Zelinski” and moved the goalposts on the recent peace agreement. Pres. Trump has called this unacceptable, which can mean military actions to pressure Iran into giving up its nuclear ambitions could proceed at any time. Likely after Pres. Trump meets with Pres.Xi later this week.

The reason oil prices have not explode beyond 100.00 is that the status quo remains in effect. The US is exporting an “extra” phenomenal 4 MM barrels oil a day, and China continues to reduce its overall daily buying by 6.5 MM barrels. It’s thought that China came into this crisis with 1.5 Bil barrels of oil in storage.

Beyond the Iran conflict, markets are also watching this week’s planned trade meeting between President Trump and President Xi. Traders had been looking for signs of Chinese buying before the talks, but that optimism is quickly slipping. What is still expected, though, is that agricultural trade will be one of the three major working points of the summit, and China will likely reveal a commitment to US bean purchases if it receives trade accommodations in other areas.

In wheat, the Kansas crop tour gets underway this week, with many expecting scouts to find meaningful stress across the crop. Still, the main event for agriculture markets is Tuesday’s May WASDE. This report carries extra weight because it delivers the first official new-crop balance sheets of the season. Expectations are centered on a tighter U.S. grain carryout, while soybean supplies are seen holding relatively steady. The acreage assumptions may be the biggest swing factor, which puts even more importance on the June update. Planting progress is expected to show another strong weekly advance, and the market’s focus will soon move from pace to condition ratings.

After a brief two-day rally late last week, cattle stumbled again on Friday, as the technical nature of the trade we discussed suggested more consolidation in what is becoming an aging bull market. Cash is the leader again, with the board fearful of giving any opportunity to hedge present record values. Outside markets this morning would suggest a softer start for cattle. Last week’s cash feeder index picked up $0.80 at $374.83 while the negotiated cattle trade pushed record prices in all areas with live sales in the north at $258 and the southern trade at $256-257. Both were up over $3 for the week.

Memorial Day is coming, another opportunity for sales to be strong, with Father’s Day in June likely seeing the last of big, high-priced cut purchases. After that, summer grilling features chicken thighs, brats, and burgers. Last week revealed continued weakness in the box beef market; select gave up $0.72, and select off $2.04.

If the cattle trade is to maintain upward momentum, June live cattle need to hold 246-247, with August feeders potentially challenging the uptrend line and positive moving average support well under the market near 359-360. Feeder cattle have noticed that cheap corn is not a guarantee later this year. With exceptional corn sales continuing to surpass expectations (lowering carryouts) and a likely June acreage reduction of more than 1 million acres, feeder cattle have started to notice that cheap corn is not a guarantee this fall.