This is the SFN Market Report with Brooks Schaffer of Palmetto Grain. Reach him at brooks@palmettograin.com or 843-540-4540.
Energy markets opened with fireworks Sunday night, with some crude contracts trading up to $120 per barrel. That pulled the grains and oilseeds along for the ride, reaching levels we have not seen in corn and beans since the summer. The news over the weekend seemed to point to an escalation of the conflict. Iran selected a hardliner to replace the supreme leader, there were attacks on civilian infrastructure, almost no ships were transiting the Strait of Hormuz, and more major oil-producing countries talked about capping wells to slow oil production as they ran out of oil storage. Trump called for the full and unconditional surrender of Iran, would not rule out troops on the ground, said he needed to have a say in who was selected as the next leader, and said the U.S. would continue the bombing campaign for as long as was necessary.
After the fireworks Sunday night and new highs, on Monday the Europeans started talking about releasing some of their strategic petroleum reserves. Later in the day, it was announced there was a meeting of the G7 nations to coordinate releases from petroleum reserves to keep a lid on energy prices. Each of these headlines brought crude lower off its highs, and as the momentum was lost the grains and oilseeds fell off their highs.
Then late in the session on Monday, Trump did an interview with CBS where he said the war was “pretty much” over now. He said the U.S. had accomplished its goals of destroying Iran’s armed forces and hostilities would be over very soon. He said ships were now transiting the Strait of Hormuz and he was considering taking over the strait. This was a major shift from the headlines he himself had made over the weekend, and the market acknowledged that. Crude actually closed lower, and so did old-crop corn and beans. The markets suddenly went from pricing in rapid escalation to pricing in at least some de-escalation. It will not be possible to put everything back together that was broken if the war is indeed over, which I remain skeptical of.
The energy secretaries from the G7 nations met this morning virtually to discuss the details of a strategic release. I think the volatility is far from over, but it may be quiet for a day or two to see how this plays out.
And the USDA report that comes out today will be almost an afterthought to the market. USDA does not make any changes to the supply side on this report anyway and will not project any new-crop numbers yet. They may tweak demand and South American supply. The next big report will be the Prospective Planting report at the end of March, but it is already being called into question since those surveys were completed at the end of February and a lot has changed since then.