Crude vs. Corn: Why These Markets Are Splitting Apart

Joe's Premium Subscription: www.standardgrain.com

Grain Markets and Other Stuff Links —

Apple Podcasts
Spotify
TikTok
YouTube

Futures and options trading involves risk of loss and is not suitable for everyone.

Oil prices exploded Thursday with WTI crude jumping 11% to $111.54/barrel—the biggest single-day gain in 6 YEARS! 😱 Gas prices are already feeling the heat at $4.11/gallon nationally, and the Iran situation is FAR from over. Trump has given Iran until Tuesday to open the Strait of Hormuz... the clock is ticking. ⏳

In today's update we cover:
🛢️ Oil's massive surge & what it means for corn prices
🌽 Funds dump 22k corn contracts—but still sitting on HISTORIC net longs
🫘 Soybean funds add 13k contracts with China buying
🌾 Wheat funds go net LONG for the first time since June 2022!
🌧️ Rain returning to HRW wheat country—bearish relief incoming?
🌡️ Drought update—High Plains baking while the Corn Belt gets relief
📦 Export sales: Corn strong, beans soft, wheat hits a marketing year LOW
🥩 JBS strike OVER — 3,800 workers return as cattle market watches closely
💥 Russia-Ukraine tensions flare again with a ship sunk in the Sea of Azov
CPI data drops Friday with inflation expected at 3.4% — don't miss it! 📊

👇 Drop your questions in the comments & don't forget to LIKE and SUBSCRIBE for daily market updates!

Transcript

Trump/Iran/Corn and Crude

SPEAKER_00 0:08

Good morning guys. It's Monday, April 6th, 5 23 a.m. Central Time. Grain markets are mixed to lower this morning. May corn futures down two at 450 and a quarter. May soybeans up three and three quarters at 11.67 and a quarter. May Chicago wheat down five and three quarters at 592 and a half. May Kansas City wheat down nine cents at 606 and three-quarters. May Spring wheat down five at 641 and three quarters. Let's start off with crude oil.

SPEAKER_01 0:33

So U.S. oil prices surged on Thursday as WTI crude jumped 11% to settle at$111.54 per barrel. Its highest close since June 2022 and the largest one-day price increase in six years. In his address to the nation last Wednesday evening, Trump reiterated that the war would soon be ending. However, he also warned that the U.S. would intensify its strikes against Iran over the next two to three weeks. As of Sunday, according to AAA, the national average price for a gallon of unleaded gasoline stood at 411, while Diesel averaged 561 per gallon.

The Funds, Farmer Selling

SPEAKER_00 1:08

The president had a couple of messages for us on Easter morning. The first one was uh very positive. We have rescued the seriously wounded and really brave F-15 crew member and officer. That's uh excellent news that that uh took place. The second one, uh, kind of uh, I don't know if this was the message I wanted on Easter morning, but the president said this at 7.03 a.m. Central Time. Tuesday will be power plant day and bridge day all wrapped up in one in Iran. There is there will be nothing like it. Open the F and straight, you crazy bastards, or you'll be living in hell. Just watch. Praise be to Allah, President Donald J. Trump. Um, interesting choice of of words and content on Easter morning. In any case, um we've got inflation coming. Gas prices, as McKenzie mentioned, have uh shot up drastically. 412 is the current average of 411 for uh gas, diesel's up to 562 and rising. We've got an inflation report coming out on Friday. CPI will be out Friday morning at 7.30. We're looking for a 3.4% annualized increase in inflation, up sharply from 2.4% last month. And this is all mainly because of gas, uh diesel prices, um, that sort of thing. Here's uh where it gets interesting for our crowd crude oil prices continue to rise. We saw crude up 11 bucks on Friday. The corn market has pushed lower uh during the last uh call it a couple weeks. During the initial phase of this uh conflict in Iran, the two markets kind of rallied in tandem. Crude rallied, corn kind of uh followed along, not to uh as severe of a degree, but corn kind of followed along. And now we've seen this divergence where corn's actually moved back lower while crude continues to move higher. So since your initial attack on Iran, which was February 28th, crude oil is up 63.5% or$42.5 per barrel. Corn is only up 12.5 cents or 2.8%. Why the uh big divergence? That's a great question. We're gonna get into the CFTC stuff here in a second. There's been a lot of farmer selling. I think the trade, at least some traders are perhaps comfortable with the March 1st corn stocks number, which was very, very high. I think some traders are perhaps comfortable with USDA's acreage projection, even though it's not real and uh really can't be, it's really useless information. But it's just like the fundamentals are not jiving with what's going on in crude. And I just I wonder how long the large money managers are gonna stick with this big net long position they've got in corn, uh, despite the fundamentals, or do they continue to stay long because of crude? It's there's there's a lot of things kind of pushing and pulling here. Let's go to CFTC.

SPEAKER_01 3:40

So for the weekending Tuesday, March 31st, large money managers were net sellers of 22,000 corn contracts. The funds were net buyers of 13,000 soybean contracts. And lastly, the funds were net buyers of 9,000 SRW wheat contracts on the week. And the net long position of 8,000 SRW wheat contracts is the largest, largest since June 2022 and marks the first time the funds have been net long since then.

Russia/Ukraine

SPEAKER_00 4:04

Very interesting stuff in the wheat market. The funds have been just perpetually short for four years. And now, oh, they're just a little bit net long. That's a pretty hefty net long position in the corn market, 258,000 contracts, pretty hefty net long position in soybeans at 204,000. Um, when you combine these three contracts, corn plus soybeans plus SRW wheat, the managed net is long to the tune of about 470,000. The record long from 200 uh 2012 was 626,000. Premium subs, you guys have full versions of the fund tracker charts in your email this morning. So you got all this fun buying and um you got this rising crude oil market. Why is corn not rising? Why the divergence? It's I think because of this. This is another category that CFTC tracks, the producer, merchant, processor, user uh net category in corn. And this is basically the the old verse, it's the old commercial category. This is the commercials. And they're very heavily short. And you've seen a lot of heavy selling here. They're net short, 572,000 contracts. That is indicative of farmer selling. It's not necessarily that farmers are selling futures contracts, it's that farmers are selling cash bushels of corn, both old crop and new crop, and the uh end user or the commercial is offsetting that position with a short position in the corn market. So it's probably fair to say that to a significant degree, farmer selling has capped any rally attempt in the corn market, despite the fact that the funds are very interested in owning the corn market. So you got a little bit of a little bit of like a standoff here, farmer selling versus fund buying. And the last uh week or so, the farmer selling has kind of won out the way that it looks.

SPEAKER_01 5:34

Tensions between Russia and Ukraine have intensified. On Sunday, a vessel carrying wheat sank in the Sea of Azov uh following an alleged Ukrainian drone attack. According to Russian officials, one crew member was killed and two remain missing. Russia, of course, has vowed to retaliate. And then also over the weekend, Russia launched a drone and missile attack against Ukraine despite an Easter ceasefire.

US Weather, Wheat Rains??

SPEAKER_00 5:58

There was a time about four years ago where this would have been a big headline in the wheat market, and it is not. Weak futures trade lower this morning. I think because we've got some rain uh coming to the southern plains, uh, perhaps let's look at the drought monitor and then some weather stuff.

SPEAKER_01 6:12

So a significant portion of the Corn Belt received precipitation last week, resulting in improved drought conditions across parts of Iowa, Minnesota, Illinois, and Ohio. In contrast, conditions deteriorated in Kentucky. Meanwhile, the high plains experienced unseasonably warm and dry weather with temperatures reaching up to 15 degrees Fahrenheit above normal. As a result, drought conditions worsened from South Dakota all the way down to Oklahoma. And uh when we look at the percentage of U.S. areas experiencing drought, corn country currently stands at 44%, soybeans also 44%, winter wheat 65%, spring wheat 21%, and cattle country 64%.

SPEAKER_00 6:50

Let's take a look at weekend rainfall, some scattered stuff in a lot of places. Up in the Dakotas, they caught some rain, or maybe it was snow. I don't know. Um, but a lot of scattered stuff throughout the corn belt in the mid-south also. Here's the forecast for US HRW wheat country, which looks a little bit more convincing with regard to expected rainfall accumulation expected to begin Thursday in parts of Kansas and southern Nebraska and northern Oklahoma. I'd like to see this stuff a little bit further west. And, you know, stuff that's you're still talking five or six days out is not necessarily uh extraordinarily reliable, but it's starting to look a little bit more convincing that you've got some rain coming. If they catch the rains here, you know, next week and into the extended period, which again doesn't bring it as far enough west as I'd like to see it, but still a good chunk of USHRW weak country uh could catch some rains. This is probably enough to help crop prospects. And um I think we're gonna see national crop ratings out uh either this week or next week. And I don't know, I they're not gonna be good to start, but if these rains hit, they could change drastically. Um here's the next seven days in terms of the forecast, and and you can see the stuff over Kansas, but some more rain for the Corn Belt also. It looks like that's southern, like two-thirds of Iowa, northern Missouri, gonna see maybe the uh heaviest rain. So there will be some uh, I'm not gonna call them planting delays, but there'll be some guys who want to get into the field that maybe are stalled for a minute.

SPEAKER_01 8:07

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 last week's premium videos?

Export Sales

SPEAKER_00 8:14

It's some hardcore grain marketing info out on Thursday, rolling Macorn HTAs. Um, apparently there's a lot of people who have Macorn HTAs. Uh, they haven't set the basis, they're thinking about rolling it. Um, I talked about this topic and uh kind of what you should look for in terms of capturing carry. We ran through full carry calculations, uh, just kind of my general thoughts. Brian Split was on Wednesday, talked about charts and the weak market specifically, among other things. In today's video, uh Dave Whitcomb is on, and we've got some super fantastic seasonal information for grain marketers. If you're a farmer and you're marketing grain, this is a video that you should absolutely watch. Everybody kind of knows what the seasonals are and how they work, but Dave did a really good job of quantifying all of it. He's got some really specific numbers, some really specific data sets, some really specific information in terms of like how and when history has told you to market grain. And I know that this information is out there, but I've never seen it presented uh this way and this accurately. If you guys want to see the premiums, that video will be out at 10 a.m. today. So if premium subs, you guys didn't miss anything yet. It'll be out at 10 a.m. If you 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. No other fee, no other obligation, nobody will try to sell you anything else, just a ton of stuff from us every single business day, guys. Give that deal a shot this morning.

SPEAKER_01 9:30

U.S. corn export sales declined last week, but remained strong for the weekending March 26th. Net corn sales were reported at 45 million bushels. The print was down 8% from the previous week and down 20% from the prior four-week average. Mexico was the largest buyer for the week. Net soybean sales were near the lower end of pre-report expectations at 13 million bushels. The print was down 49% from the previous week and down 18% from the prior four-week average. China was the largest buyer. And then net wheat sales fell below expectations. Instead of marketing year low at 1 million bushels, the print was down 51% from the previous week and down 33% from the prior four-week average. Nigeria was the largest buyer for the week.

JBS Strike

SPEAKER_00 10:11

As uh the wheat marketing year wraps up, you'll see a lot of these like weaker export sales numbers. You'll see some stuff moving to new crop. Soybean sales are really for current marketing, they are really never good this time of year. And the corn sales are still really pretty good. So we got the best corn export book on record. It's it's been fantastic, continues to be fantastic. Soybeans are not good, second worst of the last 10 years. And the only year that was worse was a prior trade war year, of course. And wheat sales are just kind of uh humming along here.

SPEAKER_01 10:37

The strike at the JBS meatpacking plant over in Greeley, Colorado is set to end today. Nearly 3,800 workers walked out on March 16th after months of unsuccessful contract negotiations. Employees are now returning to work after JBS agreed to resume discussions, which are centered around wages and workplace safety equipment. Those negotiations are set to continue later this week. However, JBS has said that it has no plans to make any revisions to its original offer that caused the workers to go on this strike originally. The resumption of operations is another bullish catalyst for the cattle market as cattle supplies are historically tight and slaughter capacity remains abundant.

SPEAKER_00 11:16

Were cattle higher on Friday or Thursday?

SPEAKER_01 11:18

Uh yeah, they sure were.

SPEAKER_00 11:19

So I heard that some somebody knew that the strike was going to end and that's why they were higher.

SPEAKER_01 11:23

Yeah, that makes sense. I'm sure that rumors were floating around and it's great to see this slaughter capacity come back online.

SPEAKER_00 11:29

Uh hopefully is this actually bullish though?

SPEAKER_01 11:31

I mean, I don't it's like it's good. We have this slaughter capacity back, but really it didn't matter that the slaughter capacity was gone because we can just shift cattle around because we don't have the cattle out there and we have all this capacity already. So it shouldn't make like a huge difference.

SPEAKER_00 11:45

Outside markets this morning, guys, are are fairly quiet given all given the long weekend. Um, stock markets like kind of mixed, treasuries are mixed, crude oil is now lower. It opened higher last night. We're now at$1.26 lower in the May WTI contract at$110.28. Uh, everybody have a great week. We'll be back on Tuesday.