This is the SFN Market Report with Brooks Schaffer of Palmetto Grain. Reach him at brooks@palmettograin.com or 843-540-4540.
The joint U.S.-Israeli attack on Iran has dominated the news cycle for the last several days. Everyone is still scrambling to try to understand the implications and see what the results and response are going to be, and the markets are no exception. There is nothing but time that will help us see some of the effects and implications.
It is worth noting that at the beginning of the Russia-Ukraine conflict, wheat moved multiple dollars per bushel. As the conflict dragged on, wheat actually traded lower than before it started. And that conflict continues unabated today but does not have too much effect on the wheat market anymore.
At the Sunday night open, the grains and oilseeds did initially pop higher but ended up closing the session lower on old crop. The area of this conflict does not have much direct effect on any one of the major agricultural commodities. It is the second- and third-degree effects that just have too many unknowns for the market to react with directional conviction.
It is widely believed that this will cause an increase in energy prices, which is bullish for corn and soybeans since so much of them are used for energy now. But offsetting that is the possibility of China’s reaction. Will this make them more or less likely to meet with Trump in April? Will it increase the pressure on them to appease him with soybean purchases, or decrease it? This could also trigger an uptick in overall inflation, which would bring more money flow into the ag commodities.
We have way more questions than answers at this stage of the conflict. So all we can do is wait and watch.
New-crop beans and corn closed unchanged on Monday. They are still sitting at multi-month highs. We need to get started making new-crop sales and hope it is the wrong thing to do. No matter what happens with the conflict, we are about to start planting new crops with a comfortable cushion of old crop.
Some of the recent strength has come from positive rumors on biofuel policies as we still wait for rules to be released and finalized. We hope those go our way, but there is still a risk they could not. We need to take some risk off the table when we can.