Grains Might Be Way Too Cheap - What are Fund Traders Watching??

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🌾 Wheat Leads the Rally
Wheat futures surged on weather concerns across the Plains—winter damage risk + hot/dry forecasts gave bulls a reason to step in.

🌽 Corn & Beans Follow + Funds Active
Corn and soybeans moved higher alongside crude oil 📈
Funds were aggressive buyers again—corn and beans both sitting with big net long positions.

📊 Acreage Debate Heating Up
Private estimates are creeping higher on corn acres, but fertilizer costs could throw a wrench into everything.
March 31 numbers? Probably noisy. June will matter more.

🚢 Jones Act Waived
The administration temporarily lifted shipping restrictions to ease fertilizer and fuel logistics—but it may be too late to impact spring costs.

🌍 China Trip Delayed
Trump’s China visit pushed back amid geopolitical tensions—trade talks (and ag demand expectations) remain in limbo.

⛽ Ethanol Slips
Production dipped, stocks rose, and margins are hovering around breakeven across the Corn Belt.

💵 Fed Holds Rates Steady
No rate change. Markets slid after the announcement as uncertainty tied to global conflict remains high.

Transcript

Grain Rally, Funds

SPEAKER_00 0:08

Good morning, guys. It's Thursday, March 19th, 5 24 a.m. Central Time Grain markets are higher across the board this morning. May corn futures up five cents at 468 and a quarter. December corn up five cents at 494 and three quarters. May soybeans up five at 11.66 and three-quarters. November soybeans up 11 cents at 11.52 and a half. May Chicago wheat up eight and a half at 612 and three-quarters. May Kansas City wheat up seven and a half at 633 and a half. May spring wheat up eight and three quarters at 646. We had a nice rally yesterday. Why don't we start there?

SPEAKER_01 0:40

Wheat futures were sharply higher yesterday with the May 26 Chicago wheat contract rising nearly 15 cents to settle near 604 per bushel. And the May Kansas City wheat contract gaining about 19 cents to close at 626 per bushel. The rally was uh driven by winter weather that moved through the U.S. plains earlier this week, potentially damaging crops that had already broken dormancy. Near-term forecasts calling for hot and dry conditions provided additional support. Corn and soybean futures also posted gains, largely supported by higher crude oil prices. The May corn contract gained nine cents to settle near 463 per bushel, while the May soybean contract contract climbed about five cents to close around 1162 per bushel.

Corn Acreage Estimates

SPEAKER_00 1:26

All right, we're gonna start off with some wheat specific weather stuff, and then we're gonna get into some bigger picture, like money manager speculative buying type stuff. So of the areas that we grow winter wheat in the United States, the Southern Plains is the biggest deal. Kansas and surrounding areas accounts for a large percentage of our production. They had this freeze event and they haven't had much rainfall or precipitation at all over the last 30 days. So there could have already been some damage done. And now you've got a weather forecast moving forward that offers no rain over the next 16 days. You've got a heat wave coming in this weekend combined with dry weather, is probably not a great cocktail. Yesterday I told you guys about a possible freeze event late next week. That is not in the forecast this morning, but uh subject to change, of course. So the the fundamental setup here with regard to weather is uh not ideal and probably a little bit friendly. It looks a little bit more probable this morning that this July Kansas City weak contract goes up and tests that high up around 658. That was posted a couple weeks ago. You're only 10 cents away here this morning. Uh very, very possible. Here's November soybeans. It looks a lot better uh after the last couple of days, after yesterday and then the overnight trade. We're now back above the area of that initial breakout, that November high, which was 1131. Again, it looks uh a little bit more probable that you could go up and test that high that was posted uh last week, I believe. Now, old crop soybean futures have been lagging, and I think there are a couple of reasons for this why they've underperformed. The first one would be just monster crop in Brazil. We kind of knew that it's kind of old news. The newer thing is that it appears a lot less likely that China is going to buy any additional old crop uh soybeans from the United States. And maybe for that reason, we've seen some bear spreading um old crop versus new crop. Here's Deese corn. We are within an earshot of the highs that were posted a couple weeks ago. We're within four or five cents here this morning of that 498.5 high. And I think it's very possible that uh those areas are tested. I included some notes about the funds in our email this morning, and this is what I said. The funds were estimated to have bought 30,000 contracts of corn in net yesterday, which was um Wednesday. Net fund length and corn now estimated at about 200,000. Funds were estimated as net buyers of 10,000 contracts of soybeans yesterday, estimated position also about uh 200,000 to the long side. Funds are still estimated to be net short, uh 20,000 contracts of SRW wheat, but net long 10,000 contracts of HRW wheat. We've got some fundamental stuff. I mean, in wheat, we've got weather and corn, we've got the fertilizer situation. We'll talk about that in a second, maybe some reduced acreage, but there are speculative buyers, fund traders who are buying grains. I think because of they're looking at some sort of chart that looks like this. The broader commodity sector, or perhaps just crude oil, compared to uh the ag commodities, which have drastically underperformed. The Bloomberg Commodity Index is a basket of commodities that includes everything and includes energies, uh, precious metals, it does include grains and livestocks, uh, everything. That thing is up 24% year to date. Meanwhile, the ag sector, uh, the Bloomberg ag sub index, it's up less than 6% year to date. So I think that there are uh speculative, there's speculative money out there in fund managers who are looking at this and saying, you know what, these grains, if crude oil holds up here, crude holds up at 95 or shoots above 100 in WTI, grains are too cheap. And I think that's why you're seeing some of this buying. It's not as aggressive as it could be. But uh last week, the funds, as we talked about, I think on Monday, the funds bought a whole bunch of corn. It was like 190,000 contracts or something. Don't quote me on that. Now, the rally didn't go very far during that time frame because there was a ton of farmers selling. Commercials sold 140,000 contracts of corn in that same week. So a lot of the speculative buying was offset by farmers selling. I'm not quite sure how much longer that can last, but I'll tell you what, if crude oil sticks here at 95 or higher, I think you can make an argument. And and the speculative community appears to be making this argument through its decisions that uh grains are just a little bit too cheap here.

SPEAKER_01 5:27

SP Global has raised its forecast for U.S. corn acres. The firm estimates this season's acreage will reach 94.2 million, an increase of 200,000 acres from its January forecast. U.S. farmers planted 98.8 million acres last season. The firm also raised its outlook for soybean acreage to 85 million, up half a million acres from its prior estimate last season. Farmers planted an estimated 81.2 million. Uh the USDA projected 2026 U.S. corn acreage at 94 million at its February ag outlook forum. Soybean acreage was estimated at 85 million.

Jones Act Waiver

SPEAKER_00 6:04

I think the process of estimating acreage this year, whether it's a private group like SP or whether it's USDA, it's going to be very, very, very difficult because of the fertilizer situation. Some people have told us, Joe, Joe, there's all kinds of acres switching out of corn. And other people have said, nah, it ain't happening. Fertilizer was all locked up. Whatever. I don't have a real strong opinion about it. I don't think. I'll just tell you this. Going into March 31st, I'm I am going to view the March 31st acreage report as being almost completely useless. Last year in March, USDA missed the corn acreage number by 3.5 million. What's to say that they couldn't miss it by that much or more this year, uh, given the situation? We've got this whole fertilizer mess. Um, and and a lot of it, you know, kind of is occurring after the surveys already went out. It's uh it's very, very messy. We know the farmers don't respond to the surveys in mass. Uh the survey response rate is very poor. So I don't think you can hang your hat on the March 31st numbers. I think you've probably got to wait until June 30th, which is the planted acreage report, to see some greater insight and maybe some more accuracy in the data. Now, that doesn't mean that the traders aren't going to trade the March 31st numbers because they absolutely will. I just don't think that they're going to be anything close to reality. I hope I'm I hope I'm wrong about that. I hope they're right. Um, with regard to the corn soybean ratio, we're down to 2.3 to 1, which is really moved in the direction of uh corn acres here recently. But uh we've got we've got a lot of debate about this whole situation.

SPEAKER_01 7:32

President Trump has temporarily waived the Jones Act for 60 days. The 1920 law requires that cargo transported between U.S. ports uh be carried on U.S. built, owned, and operated vessels. The temporary waiver will allow foreign-owned flagged ships to move goods domestically, with the goal of reducing shipping costs for commodity for commodities such as fertilizer and crude oil. The move comes amid supply chain disruptions caused by the conflict over in the Middle East. The waiver could also help lower the cost of transporting nitrogen fertilizer along the Mississippi River. However, some analysts believe the waiver comes too late to meaningfully reduce costs ahead of the spring planting season.

SPEAKER_00 8:15

Um, so general consensus among the analyst community, this is Javier Blasi, he's a Bloomberg uh energy reporter. Uh, general consensus is this uh Goldman Sachs estimated that the Jones Act waiver would reduce refined fuel prices in the East Coast by six to eight, uh 60 to 80 cents per barrel. So like less than a dollar. I mean, it's it's nothing. They're looking for very minimal impact here. He believes personally that they should rescind the act for good. I think it's a half measure. It's a half measure. If they really want to do something to try to um tame crude oil prices, ease the price pressures, you're gonna have to do something to restrict exports. And I don't know if they uh want to do that. We're a big, we're the biggest oil producer in the world here in the United States, and uh we export a lot. And they maybe they're gonna have to do something along those lines. I don't know. Maybe of more interest yesterday was this story. There was uh here's our friend Josh Glenville on X. There was an attack on this South Pars uh natural gas field in Iran, and it's it's I believe the largest natural gas field in the world, and it feeds their nitrogen production facilities. So, long story short, there will be, as Josh said, a lasting impact on the nitrogen market because of that. And uh that kind of ties back to our acreage discussion as well. And that could be, you know, some people have said this is more of a 2027 thing, perhaps. Maybe a lot of the uh fertilizer and nitrogen products that we need for the 26 crop, maybe that's already here in the country, but uh maybe for 27, it's gonna be a different story.

SPEAKER_01 9:35

If you guys have not checked out our premium content, you sure need to do so. Joe, can you tell our viewers about some of our recent premium videos?

Trump China Trip Update

SPEAKER_00 9:41

Brian split joined Mackenzie for charts yesterday, always fantastic stuff. Brian is the best in the business when it comes to technical analysis of the grain markets, and uh, we love to hear his stuff every couple weeks. It's really, it's it's a different and fresh perspective. I know you guys like listen if you're listening to our show, we talk mostly about fundamentals. A lot of other people do too, but uh Brian's stuff is pure technical, which sometimes uh there's a big contrast between the two in a lot of situations. Ryan Moe was on with me earlier this week and we talked about this storage crunch in the Western Corn Belt, and more importantly to me, the scary accumulator situation. There appear to be a lot, a lot, a lot of new crop corn sales tied to accumulator contracts. And I think that it could get, and maybe even in real time, is getting very, very messy. But you need to understand the details of this because I think it will or could impact the market uh fairly severely uh this summer if the right or wrong things happen. If you guys want to see the premium stuff, go to standardgrain.com. You can sign up this morning. This is a$50 per month subscription. You can cancel it any time. There's no other fee, no other obligation, nobody's trying to sell you anything else. Just a ton of content direct from us guys. Every single day we have a new premium video. If you're the decision maker in your farm operation, if you do the marketing, if you buy the crop insurance, if you deal with the banker, if you deal with the landlords, um, our stuff is absolutely a must-watch. It's it's just it's it's stuff that you almost can't do without now. All your neighbors are watching it. And uh, if you're not watching it, you're gonna be behind, certainly.

SPEAKER_01 11:05

According to the White House, Chinese officials agreed with postponing Trump's trip to Beijing, which had been scheduled for later this month. The White House is currently working to secure a first future date for the meeting. On Tuesday, Trump said he needed to remain in Washington due to the demands of the Iran war, but plans to travel to China in about five to six weeks. The postponement pushes back ongoing U.S.-China trade talks, including negotiations over Chinese purchases of U.S. soybeans.

Ethanol Production

SPEAKER_00 11:33

The narrative as it stands right now, as I see it with regard to China and U.S. soybean purchases, goes like this. China has bought officially its 10.9 million metric tons of old crop U.S. soybeans, but they're calling it 12, and that's fine. Um they're not the narrative right now as I see it is that they're not buying any more for this year. The narrative as I see it also is that they say they're gonna buy 25 million metric tons of beans each of the next three years. And I think what that entails is that they'll start buying beans for new crop delivery, probably sometime this spring or summer. It could be May, June, July, where they start buying U.S. soybeans for new crop delivery, meaning um after September 1st delivery. So you'll see a lot of beans uh potentially if everything works out, uh shipped and sold to China post-harvest. Uh, but I think for old crop, this the scenario is just not what uh not what some people thought it could be after those Trump comments several weeks ago.

SPEAKER_01 12:29

U.S. ethanol production declined last week. Weekly output was reported at 1.09 million barrels per day, down 3% compared to the prior week, but up 3% versus the same week last year. Ethanol stocks climbed to 26.41 million barrels. The print was up 3.2% compared to the previous week, but down 3.5% compared to the same week last year, according to Reuters data. U.S. ethanol margins currently range between breakeven and 30 cents positive across the corn belt.

SPEAKER_00 12:57

Um ethanol production numbers are fine. I'll say this. Uh, part of the reason of that the funds are large speculators, whoever, that they're interested in owning things like corn and soybeans is because as the years go by, they're they're they're fuel products, more so that not more so than anything, but to a significant degree. I mean, 40% of the corn we grow in this country is turned into ethanol. We're now grinding more soybeans uh than ever for soybean oil to turn into biofuel. Um, there's there's there's just the general commodity tie, but you've also got the more specific uh biofuel and fuel tie.

Fed Decision, Transitory Inflation?

SPEAKER_01 13:29

USDA reported a flash sale yesterday. U.S. exporters sold 120,000 metric tons of soybean cake and meal to unknown destinations for delivery during the next marketing year.

SPEAKER_00 13:39

Very good. Need to see more of it.

SPEAKER_01 13:41

In a widely expected move, the Fed maintained its benchmark federal funds rate with a range of 3.5% to 3.75% yesterday. The latest dot plot indicates that policymakers anticipate one rate cut this year and another in 2027. Fed chair Jerome Powell emphasized that further progress in reducing inflation is necessary before rate cuts can resume. In their post-meeting statement, policymakers also highlighted heightened economic uncertainty due to the conflict in the Middle East. The stock market moved lower following the report, with the SP declining 1.4%, the Dow losing 1.6%, and the NASDAQ dropping one and a half.

SPEAKER_00 14:20

Okay. So the Fed fund rate uh unchanged, effective target 3.63%, highest it got in this cycle was 5.38% effectively. There is um a very strong likelihood of unchanged rates again in April. The question now, I think, uh more so than anything, is this is the inflation tied to the Iran situation transitory, as they said it was post-COVID? And um, some people are in the transitory transitory boat. Hey, this ain't gonna last very long. Iran can't defend itself that long. And other people are other people think this is the beginning of like another commodity, uh put it in quotes, super cycle, you know. I don't know, but that's that's the big question out there right now. What did cattle do yesterday?

SPEAKER_01 14:59

Cattle futures were mixed. Live cattle saw gains ranging from 17 cents up to 77 cents. Feeders, meanwhile, saw losses ranging from 32 cents down to a buck oh seven. Box beef prices were lower. Choice was down a buck 56 at 401.75, and select was down 55 cents at 396.17.

SPEAKER_00 15:16

Stock market is off just marginally this morning. Treasury's off a little bit. US dollar is about flat. Crude oil is up 39 cents in the May WTI at 95.83. Have a great day, guys. We'll be back on Friday.