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President Donald Trump’s looming 8 p.m. ET ceasefire deadline sucked the air out of global markets, including agricultural commodity markets, on Tuesday, after he warned in a social media post that without an agreement, a “whole civilization will die tonight, never to be brought back again.”
The threat of a major intensification of the U.S.-Israel war with Iran that has stretched 39 days resulted in a mixed, jittery performance for oil futures, while global stock markets and other assets viewed as risky, including most grain and livestock futures markets, saw selling pressure.
West Texas Intermediate crude for May delivery finished 0.5% higher at $112.95 a barrel on the New York Mercantile Exchange, while June Brent crude fell 0.5% on ICE Futures Europe to $109.27 a barrel.
Trump on Tuesday afternoon told Fox News that he was in “heated negotiations” involving the war with Iran after mediator Pakistan asked for a two-week extension of his Tuesday deadline for Tehran to reopen the Strait of Hormuz.
Expect all eyes to remain on crude, said Tom Essaye, founder of Sevens Report Research, in a Tuesday morning note, observing that West Texas Intermediate and Brent futures have served as the best proxies for the “intensity and outlook for the war.”
He offered a guide to what oil price thresholds signal a material escalation and longer conflict versus the levels that signal a favorable de-escalation that would allow market participants to turn their focus back to conventional fundamentals.
If there’s no last-minute deal and military action escalates, watch for WTI futures to challenge the intraday high of $119.48 a barrel from March 9, a nearly four-year high, Essaye wrote. A break above that level would signal increasingly urgent fears of a lasting, global physical market shortage, he said. The next level to watch is the March 8, 2022, closing high of $123.70, which would signal a long-term bullish breakout and would mean the previously unthinkable targets of $175-$200 a barrel laid out by geopolitical strategists are a possibility, he wrote.
In the event of a last-minute deal or a postponement of the deadline, the downside level to watch for WTI is $88.13, the close from March 23. A finish below that level would be a sign traders are growing convinced an end to the conflict and a reopening of the Strait of Hormuz are within sight, he said.
Grain futures were lifted in March as the war sent crude prices soaring, but have since seen the correlation weaken. Grains have struggled to maintain upside momentum on expectations for ample near-term supplies though the fertilizer shock created by the war has raised concerns about longer term global food production prospects.
A renewed surge by oil futures to fresh highs could serve to reignite inflation fears but could also stoke expectations for a significant economic slowdown or even recession.
‘All roads lead to higher prices, slower growth’: International Monetary Fund Managing Director Kristalina Georgieva told Reuters in an interview late Monday that inflation and an economic slowdown as a result of the war have become largely inescapable.
The IMF is expected to release a range of scenarios in its semiannual World Economic Outlook due on April 14.Without the war, Georgieva said the IMF had expected a small rise in its projection for global growth of 3.3% in 2026 and 3.2% in 2027 as economies continue to recover from the pandemic. But even if the conflict is swiftly resolved, the IMF remains on track to cut its forecast for economic growth and bump up its outlook for inflation, Georgieva said.
- “Instead, all roads now lead to higher prices and slower growth,” she said.
Trilateral agreement, bilateral resolutions: U.S. Trade Representative Jamieson Greer said Tuesday that a North American free trade agreement can be reworked to serve as a trilateral dialogue, but also a platform for addressing bilateral issues between participants, Agri-Pulse reported. The comments come after President Donald Trump in recent months questioned whether the U.S.-Mexico-Canada Agreement makes sense as a trilateral deal,since many of the thorniest trade issues between the U.S. and its neighbors are bilateral issues.
“We do have to have some kind of a protocol or something with Mexico and one with Canada, separately I think, to deal with issues specific to those countries,” Greer said during an event hosted by the Hudson Institute. But he added that parties can “layer over” those protocols on the existing agreement, the report said.
China’s coal-based urea cushion: The global supply crunch for urea is causing headaches for farmers around the world, but Chinese producers remain insulated from the crisis due to the country’s reliance on coal to produce the nutrient, Reuters reported. While other big exporters of urea, including Russia, Qatar and Saudi Arabia, use natural gas to produce urea, around 78% of Chna’s output is produced with coal, the report said.
- “China is largely self-sufficient in urea and is less exposed to natural gas price volatility than many other producing regions,” Willis Thomas, head of fertilizers analysis at CRU told Reuters.
E15’s Iran-inspired sales pitch: Politico reports that Republican ag leaders who have spent years pushing for year-round E15 sales nationwide are now pitching the idea as a counterweight to rising gasoline prices caused by the Iran war. “If we can get an E15 bill to the president, we know that would help every consumer at the pump out across the United States,” said Sen. Joni Ernst, an Iowa Republican, at a Senate pro forma session Monday, the report noted. “That’s something that would help the farmers right away as well.” Politico observed that Deputy Ag Secretary Stephen Vaden promoted the same conclusion in a Saturday X post about gas prices: “The higher the ethanol content, the lower the price. Biofuels save money.” After years of struggling to pass legislation that would authorize the year-round sale of E15, farm-state lawmakers are taking a “now more than ever” messaging approach to highlight how the policy could present a two-pronged solution for both consumers and farmers struggling amid the war in the Middle East.”