Good morning!
Grain futures prices solidly higher overnight… As of 6:00 a.m. CDT, May corn was up 8 1/4 cents and hit a 10-month high. May soybeans were 18 3/4 cents higher and hit a nearly two-year high. May soybean meal was modestly up, while bean oil prices were up 193 points and hit another contract high. May SRW wheat was up 6 1/4 cents and hit a nine-month high. May HRW wheat was 17 1/2 cents higher and also hit a nine-month peak. The grain market bulls are benefitting from spiking crude oil prices and also from keener buying interest from speculators, including the big fund traders. The key outside markets today see the U.S. dollar index higher and at a 3.5-month high, with Nymex crude oil prices solidly higher, at a nearly four-year high, and trading around $103.00 a barrel after spiking to near $120.00 overnight. The yield on the benchmark 10-year U.S. Treasury note is presently 4.18 percent.
Latest on the war in Iran…
-- Fitch Ratings says Strait of Hormuz closure likely temporary
--Iran signals no letup as Khamenei’s hardline son becomes leader
--Brent crude oil pares gains after soaring to $119.50 a barrel
--G-7 to discuss release of oil from IEA reserves to tame prices
--U.S., European shares drop, after South Korea, Japan lead Asian slump
--President Trump to address House Republicans at 7 a.m. CDT
--$100 oil shock set to strain Asia’s cash-strapped governments
-- Economist Ed Yardeni raises odds of U.S. stock market meltdown to 35% on Iran war
--U.S. considers idea of special operation to seize Iran’s uranium
--Gold drops as oil surge stokes fears of higher interest rates
War in Iran raises crop prices worldwide… ”Palm oil prices surged as much as 10%, soybean oil jumped and wheat neared a two-year peak as the war in the Middle East drove energy and fertilizer costs higher and threatened to tighten supplies across agricultural markets,” Bloomberg reported overnight. “Disruptions to crude oil supplies wrought by the conflict are boosting the appeal of crop-based biofuels, lifting demand for vegetable oils and corn. The effective closure of the Strait of Hormuz — a major conduit for the fertilizer trade — has also led to a spike in the price of crop nutrients as farmers rush to secure supply. In addition, wartime food security concerns could spark some countries to stock up on staples like wheat,” said the report. Palm oil prices jumped the most since 2022, when top grower Indonesia halted exports. “Grain and oilseed markets are following energy in early Monday trading,” said Joe Davis, director at Futures International, a brokerage. “The macro and energy markets will continue to lead ag commodities on any escalation of the war on Iran,” he said and as reported by Bloomberg. Vegetable oils and meal in China also surged on Monday. The most actively traded soybean meal futures on the Dalian Commodity Exchange rallied as much as 6% to 3,066 yuan per ton while palm also rose to hit a daily limit. Rapeseed oil and meal did the same in Zhengzhou.
Stagflation concerns grip stock, financial markets… Optimism for a quick resolution of the conflict in the Middle East is rapidly ebbing in financial markets, with investors pricing in a deeper and longer-lasting supply shock, Bloomberg reports. “The shift in market sentiment gathered pace after President Trump said parts of Iran had yet to be attacked and that $100 crude was ‘a very small price to pay’ for ‘safety and peace,’ undercutting hopes the conflict would be relatively contained. Investors have had to increase their probability of the worst-case scenario, with the challenge being the stagflationary nature of the shock, and are now bracing for a long winter with no clear timeline of an end to it,” said the report. Meantime, International Monetary Fund Managing Director Kristalina Georgieva said lengthy hostilities in the Middle East would risk hitting markets and economies, while throwing up unexpected challenges that require policymakers to prepare for a “new normal.” Georgieva said a 10% increase in energy prices persisting for a year would push global inflation up by 40 basis points and slow economic growth.
G7 to discuss joint release of oil reserves… G7 finance ministers will discuss a possible joint release of petroleum from reserves coordinated by the International Energy Agency, in an emergency meeting on Monday aimed at tackling the surge in oil prices following the conflict in the Gulf, according to the Financial Times. “The ministers and Fatih Birol, IEA executive director, will hold a call at 8.30 a.m. New York time to discuss the impact of the Iran war, according to people familiar with the situation, including a senior G7 official. Three G7 countries, including the U.S., have so far expressed support for the idea, according to the people familiar with the talks,” said the Times. “The 32 members of the IEA hold strategic reserves as part of a collective emergency system designed for oil price crises. One person said some U.S. officials believe a joint release in the range of 300 million to 400 million barrels — 25 to 30 percent of the 1.2 billion barrels in the reserve — would be appropriate, said the report.
Warm over much of U.S. today, but severe weather possible in Midwest, Plains Tuesday … The National Weather Service today said above to well-above average, spring-like conditions will continue across much of the country to start the week. Forecast highs into the 70s are upwards of 25-35 degrees above average, and numerous daily record-tying/breaking highs will be possible in the Midwest and Plains states. Some colder air will begin to spread southward behind a front over the northern Plains/Upper Midwest Monday and into the central Plains Tuesday. Meantime, on Tuesday severe weather and flash flooding are possible across much of the Midwest and into the central/southern Plains. Storms are expected to focus both along a very slow-moving cold front from the Great Lakes southwest through the Missouri Valley and into the central Plains.
Weak U.S. jobs report tilts at least one Fed official more dovish… Federal Reserve Vice Chair for Supervision Michelle Bowman signaled the weaker-than-expected February U.S. employment report has tilted her back to supporting additional interest-rate cuts. “I was fine with holding at our January meeting, but now that we’ve seen that the labor market, maybe that was an anomaly,” Bowman said in an interview Friday on Fox Business and as reported by Bloomberg, referring to strong January job creation. The new jobs data “confirms to me that the labor market continues to be weak, and it could use some support from our policy rate,” she said. Fed officials gather for their next FOMC policy meeting March 17-18.
China’s central bank still stocking up on gold… China’s central bank bought more gold in February, extending its streak of purchasing to 16 months, according to a Bloomberg report. “Gold held by the People’s Bank of China rose by 30,000 troy ounces last month to 74.22 million fine troy ounces, according to data released on Saturday. The purchase extends the latest round of accumulation that began in November 2024. Despite recent declines, gold has gained over the past few weeks, clawing its way back above $5,000 an ounce. Investors were seeking safer assets after the U.S. and Israel attacked Iran, intensifying geopolitical risks in the Middle East,” said the report. Global central banks’ gold purchases slowed at the start of the year, as heightened volatility weighed on appetite, according to a note from the producer-funded World Gold Council last week. Net buying, led by Central and East Asian countries, totaled five tons in January, compared with a 12-month average of 27 tons. “Some countries have also sold gold recently, but buying still outweighs selloffs. The head of Poland’s central bank — the world’s biggest reported buyer of bullion — laid out a proposal to sell gold reserves to finance defense spending, whereas both Russia and Venezuela’s central banks have sold gold in recent months,” said the Bloomberg report.
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Malaysian palm oil futures prices surge… Malaysian palm oil futures jumped by over 7% to around MYR 4,680 per MT on Monday, rising for a third session and hitting their highest level in over a year. Gains were driven by expectations that soaring crude oil prices would boost demand for biodiesel feedstocks, alongside support from a weaker ringgit and firmer edible oils in Dalian and Chicago. Demand prospects also improved after February imports rose by top buyer India rose 10.1% mom to a six-month high in February, aided by wider price discounts to rival oils. Meanwhile, Reuters projected inventories likely fell for a second month to a four-month low in February. In China, another key buyer, consumer prices rose in February on Lunar New Year demand, potentially supporting food consumption. However, upside was capped as cargo surveyors estimated February exports dropped 21.5%–22.5% from January despite Eid al-Fitr restocking. Traders now await Malaysian Palm Oil Board data later this week for clearer supply signals.
Cattle futures markets see heavy profit-taking pressure… April live cattle futures on Friday fell $3.95 to $234.575 and for the week gained $2.35. March feeder cattle futures lost $6.975 to $355.625 and on the week were up 20 cents. The cattle futures markets Friday saw heavy profit-taking pressure and weak long liquidation from the shorter-term futures traders as risky assets, including stocks, fell to end the trading week as the war in Iran continued. Very light cash cattle trade was reported by USDA as of midday Friday, with the agency saying steer and heifer prices averaged $240.00. Longer-term supply and demand fundamentals remain solid for the cattle and beef markets. Historically tight cattle supplies on feedlots and still-strong consumer demand for beef will continue to limit the downside in prices.
Lean hog futures pause to end trading week… April lean hog futures on Friday fell 5 cents to $95.625 and for the week were down 10 cents. The hog futures market paused to end a choppy trading week. Risk aversion in the general marketplace last week did squelch the hog futures bulls, amid the ongoing Middle East war. The latest CME lean hog index is up 37 cents to $90.55. Today’s projected cash index price is up another 19 cents to $90.74. The national direct five-day rolling average cash hog price quote for Friday was $67.90.A resilient cash hog market continues to lend support to lean hog futures and will keep a floor under present futures prices.