Good morning!
Grain futures mixed overnight… As of 6:00 a.m. CST, May corn was up 1 ¾ cents, May soybeans were down 2 cents, May soybean oil was up 8 points, May soybean meal declined 30 cents. May SRW wheat was up 2 ¼ cents, while May HRW wheat was up ¼ cent. Markets were stabilizing following Monday’s limit-down declines for old-crop soybean futures and soybean oil. The drop was sparked when President Donald Trump on Sunday threatened to delay a summit meeting with China due to Beijing’s failure to join efforts to open the Strait of Hormuz, and as crude-oil futures fell. The downdraft was aided by technically overbought conditions. Trump later tied a request for a delay to the demands of managing the conflict in the Middle East (see item below). The key outside markets today see the U.S. dollar index up slightly, while Nymex crude oil prices were rebounding, up 3.2% to trade around $96.42 a barrel. The yield on the benchmark 10-year U.S. Treasury note was trading near 4.23 percent.
Latest on the war in Iran…
–Oil jumps as Iran steps up attacks on infrastructure
–Israel says Iran security chief Larijani killed in airstrike
–Iran’s new supreme leader rejects proposals for reducing tensions with U.S.: Reuters
–International Maritime Organization chief says naval escorts won’t guarantee safe passage through Strait of Hormuz
–UAE suspends operations at natural gas field in UAE after a drone attack
–Key UAE report of Fujairah suspends oil loadings
Trump seeks China summit delay… President Donald Trump Monday afternoon said the timetable for a planned summit meeting with Chinese leader Xi Jinping, scheduled to take place in China March 31 to April 2, was now in flux as he deals with the conflict in the Middle East. “I don’t know, we’re working on that right now,” Trump told reporters. “We’re speaking to China. I’d love to, but because of the war, I want to be here. I have to be here, I feel,” he said, adding that the U.S. had requested that “we delay it a month or so.” Trump and administration officials emphasized the demands of managing the war as the reason for the delay. In contrast, Trump on Sunday had told the Financial Times that he might delay the summit due to the administration’s ire over China’s lack of commitment to joining an effort to reopen the Strait of Hormuz, sparking a selloff that led to a limit-down drop for old-crop soybean futures.
- Wendy Cutler, a senior vice-president at the Asia Society Policy Institute, a Washington think tank, told the South China Morning Post that while a delay was not “ideal”, it should not be viewed as a setback in relations if both sides quickly agree on another mutually convenient date in the not-too-distant future. “Both sides privately must be somewhat relieved as they could use more time to flesh out possible deliverables for a leaders’ meeting,” said Cutler, a former U.S. trade negotiator.
Diesel above $5 a gallon… The nationwide average retail price for diesel hit $5.044 a gallon on Monday, according to the American Automobile Association, extending its sharp rise since the start of the war with Iran. The average price was $3.651 a month earlier, according to AAA. Diesel hasn’t been above $5 a gallon since December 2022. Diesel has led fuel prices higher as the closure of the Strait of Hormuz extends a chokehold on shipments of crude oil, fuels, natural gas, fertilizer and other commodities.
- Diesel is the lifeblood of the US freight, agriculture and construction industries, and any spike in retail prices will ripple through the broader economy, Bloomberg noted. Prices have surged faster than most other petroleum-based products because Persian Gulf refineries are major suppliers of the fuel.
Cordonnier steady on South America outlook: Pro Farmer crop consultant Dr. Michael Cordonnier on Monday left his estimate of Brazil’s soybean crop unchanged at 178 million tons, with a neutral to lower bias. Brazil soybeans were 61% harvested as of late last week, according to AgRural, an advance of 10% for the week. The harvest is being slowed by wet weather in northern Brazil, while yields have suffered due to dry weather in Rio Grande do Sul. Cordonnier left his Brazil corn estimate unchanged at 133 MT, with a neutral to lower bias. He left his Argentina soybean estimate unchanged at 47 MT, with Argentina corn at 53.0 MT, both with a neutral to lower bias.
- Cordonnier is keeping a close eye on Rio Grande do Sul, noting that Emater has lowered its estimate for the Brazilian state’s soybean crop to 19.0 million tons, down 2.4 MT, or 11.3%, from its original estimate of 21.4 MT.
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Fed to begin policy meeting… The Federal Reserve’s rate-setting Federal Open Market Committee begins a two-day policy meeting Tuesday, in which it’s fully expected to leave interest rates on hold as it waits to see how the sharp runup in oil prices resulting from the Iran war plays out in terms of fanning inflation and slowing economic growth. Federal Reserve Chair Jerome Powell “is likely to acknowledge risks of stagflation, while emphasizing a wait-and-see approach,” wrote economists at Bank of America Global Research, in a note. “We will be interested to see if he tries to reset the market narrative that higher oil prices are unambiguously hawkish.”
Trump talks about ‘taking’ Cuba… President Trump on Monday escalated rhetoric against Cuba on Monday, Reuters reported, telling reporters he expected to have the “honor” of “taking Cuba in some form.” A U.S. oil blockade has tipped the nation into an economic crisis. “Whether I free it, take it, I think I could do anything I want with it, if you want to know the truth,” Trump said. “They are a very weakened nation right now.” Reuters noted the remarks come as Cuba and the United States have opened talks aimed at improving their relations, which have reached one of their most contentious points in the 67 years since Fidel Castro overthrew what had been a close U.S. ally.
When the Strait re-opens… Commodity prices outside of oil are likely to remain supported once the Strait of Hormuz is finally reopened, Peter Boockvar, chief investment officer of One Point BFG Wealth Partners, told CNBC’s Squawk Box program Tuesday morning. That’s likely to be a scenario in which Iran’s regime is still in place, he said. “We know that oil prices are obviously going to fall like a rock once this clears up, but I do not think we are going back to $65 oil. I do not think we are going back to $4 corn. I do not think we are going back to $2,000 aluminum…This is just going to prolong the inflationary world that we’ve been in,” he said.
Malaysian palm oil futures fall… Malaysian palm oil futures dropped around 1% to trade below MYR 4,650 per MT on Tuesday, snapping a four-session winning streak as a stronger ringgit and weaker edible oils on the Dalian exchange weighed on prices, according to TradingEconomics.com. Sentiment was also rattled by Trump’s remarks indicating that he plans to delay a visit to China later in March by about a month due to the Iran war, the report said. Losses were limited, however, by a rally in crude oil as the Iran war shows no signs of abating. On the demand side, exports remain firm, the report noted, with cargo surveyors noting shipments of Malaysian palm oil products for March 1–15 surged 43.5% -- 56.9% mom, boosted by Ramadan and Eid buying. In India, the world’s largest consumer, palm oil imports rose 11% in February to a six-month top as discounts to rival oils prompted refiners to boost purchases, the report said, while top producer Indonesia is said to be weighing new taxes on commodities, including palm oil, to ease fiscal strains from elevated global oil prices.
Cattle futures bulls steadied the ship…Live and feeder cattle markets saw good corrective rebounds and perceived bargain hunting from recent selling pressure on Monday, alongside short covering. The selloff in grain futures likely aided feeders. Lower crude oil prices and better risk appetite in the general marketplace was also a positive for the cattle futures markets to begin the week. USDA on Monday reported lower cash cattle trading last week, with an average price of $234.83, down $5.11 from the week prior. The noon report Monday showed wholesale boxed beef cutout values back on the rise. The market largely shrugged off the start of a strike at a large JBS packing plant in Greeley, Colorado. The walkout had been widely anticipated for weeks.
Hog futures struggle… A meager advance for hog futures alongside solid gains in cattle futures on Monday doesn’t bode well for hogs. The near-term technical posture of the lean hog futures market has deteriorated. The latest CME lean hog index rose 16 cents to $91.60. Tuesday’s projected cash index price was up another 16 cents at $91.76. The national direct five-day rolling average cash hog price quote Monday was $69.80.