The grain bears were in charge. Wednesday, March 16, 2022

Wheat prices slid to limit down after the headline of a possible ceasefire agreement between Ukraine and Russia was released. Although there is nothing official at this point, traders are taking risk premium out of the market. Just how much the market needs to back off will be determined by how much of the spring crop Ukraine is able to get planted. Weather in the Southern Plains of the U.S. is dry. If the dry pattern continues, we will likely see prices adjust.

CBOT and KC wheat were limit down at the close while corn was trading down 27¢ at the close. Soybean prices were able to fend off the selling pressure throughout most of the day, but ultimately prices closed 8¢ lower.

Crude oil continued to bounce around throughout the day from positive to negative as traders digested the headlines coming from the peace negotiations. April crude was down $1.40 at the 1:30 closing bell. RBOB was lower on the day while LSDF (low-sulfur diesel fuel) was higher.

April Feeder Cattle futures managed to close higher on the day while April Live Cattle were around $1.50 lower. Lean hog prices were quietly mixed on the day.

The Federal Reserve board decided to raise short-term interest rates by ¼ of a point today. They indicated to the market that they are very likely to do the same at the next six scheduled meetings this year. That is slightly more aggressive than many traders were thinking we’d see for 2022. Although the stock market initially shot lower on the news, it was able to rebound to the same levels it was trading before the report was released. Now that we know what the Fed is going to do for the remainder of the year, traders will start to adjust economic models and closely watch the monthly data for a change in inflation. It won’t happen overnight, but the path has been set by the Fed to get a handle on inflation.

Hope of a Russia-Ukraine ceasefire deal has spread across headlines rampantly this morning. Wheat prices reacted negatively on the news as futures slid to limit down. Is this too much of a knee-jerk reaction on headlines? There has not been any confirmation of a peace deal at this time. A week ago, there were reports that infrastructure in Ukraine was damaged enough that it would be nearly impossible for farmers to get all the acres planted this spring. Traders are struggling with which headlines are reliable.

Corn futures are sliding lower on the decidedly weaker wheat market. May is down 27¢ while December is down 17¢. The May contract should find support at $7.29 on a closing basis, which is the low from last week and at the 20-day average near $7.14. The February 24 high at $7.16 coincides nicely with the 20-day average, which makes that area an important spot for the bulls to defend.

Soybeans are trying to hold on to small gains of 1¢ to 2¢ in the old crop, while new crop is down 1¢. Wheat being locked limit down in the CBOT May and down over 80¢ in the KC is not helping corn and soybeans today.

Live cattle futures popped above the Tuesday high briefly before moving lower on the day. April Live Cattle are now trading down $1.00 and are below the low from yesterday. April Feeder cattle futures were up $1.25 earlier today but have drifted a bit to only up 50¢. The AM Boxed Beef report showed Choice up $0.60 and Select down $0.68 this morning. Hog futures are quietly 20¢ to 70¢ higher.

Crude oil has traded on both sides of even today. Futures are now trading higher by 60¢. The stock market is thinking any deal between Ukraine and Russia is positive as the S&P 500 is up 1.6% while the Dow Jones is up 1.1%. Some of the strength in the stock market is likely tied to the very strong day seen in the Hong Kong Hang Seng index being up 9%.

The markets will have one more headline to digest this afternoon when the Federal Reserve board makes its announcement regarding any changes to short-term interest rates and monetary policy. The market is prepared for a ½ point increase to short-term rates. However, some analysts and economists think the recent world events dictate a ¼ point hike instead. Either way, the era of record low interest rates is coming to an end. We have seen the 30-year mortgage rates nearly double what they were from their low.

Wheat is giving back half of the gains from Tuesday rally as traders continue to digest headlines multiple times a day. Shortly after the open this morning, CBOT wheat is down 40¢, KC wheat is off by 41¢, and Minneapolis is down 30¢. The weakness in wheat is the likely reason for corn being 7¢ lower on old crop and 4¢ lower on new crop this morning.

The soybean bulls used the dip below the 20-day average on Tuesday as a buying opportunity. Prices rebounded Tuesday to settle just below the key moving average. Futures are 18¢ higher on old crop and 13¢ better on new crop shortly after the morning session restarted.

Crude oil is quietly higher this morning. May crude is up $1.60 and is in the middle of the wide range from yesterday. So far, the May contracts has posted an inside day on the chart, meaning prices are above the low and below the high from yesterday. Major support below sits at $89.92 today, the 50-day average.

Cattle traders are still shooting for a close over the 20-day average. The relatively quiet trading range on Tuesday was surely welcomed after a few weeks of wild ranges. The PM Boxed Beef report from Tuesday pegged Choice higher by $2.39 and Select lower by $1.10. Feeder cattle opened 50¢ higher while Live Cattle were slightly lower.

Lean Hog traders should be encouraged to see the PM Cutout rise $1.29. Hog futures were $1.00 higher shortly after the open this morning.

The outbreak of highly pathogenic avian influenza (HPAI) across multiple U.S. states is a story that would normally be getting more attention if there wasn’t a war. The last time the U.S. had to deal with a strain of the avian flu was in 2015. So far, this strain has impacted egg-laying flocks the hardest. Total birds culled so far in the U.S. stands at 7.65 million, according to the USDA on Monday.

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Tags: wheat, live cattle futures, crude oil, prices, corn futures, soybean