Today, I joined Michelle Rook on AgWeb’s Markets Now to discuss the latest in corn, soybean, and wheat markets. I also covered oil, gold, interest rates, and the US dollar. You can watch the full interview HERE.

Michelle Rook: Welcome to Markets Now. I’m Michelle Rook with Darin Newsom, Senior Market Analyst for Barchart. Well, we’re seeing some mixed trade in a quiet session in the grains, livestock. At least the cattle market is lower this morning. On the outside market front, crude oil’s up, the Dow is down, or the stock market and indices are down. Darin, some of that has to do with some of this unrest in the Middle East. Let’s talk first of all about crude oil. Where do these energy markets go here with these Middle East tensions rising, do you think?

Darin Newsom: Yes, theoretically, this should continue to provide support. We certainly saw it late last week, and then we saw it back off a little bit on Monday. There’s going to be this undercurrent of support anytime you get this unease, increased violence, whatever we want to call it, but the big thing is countries lobbying missiles back and forth at each other.

You’re going to continue to see this undercurrent of support, even if it’s just coming from the non-commercial side, because if we look at the spreads, we know that West Texas Intermediate crude oil spreads have been in backwardation or inverted for months at a time now, probably over a year now. It just continues to indicate there’s a tighter supply and demand situation domestically. It’s just that it hasn’t changed all that much. It puts an asterisk by it when we see it inverted. Is it more or less than what it used to be?

There’s just undercurrent of support right now. It looks like buying’s probably coming from both sides, predominantly the fun side. This will continue as long as the headlines continue to scream about missiles being launched, particularly if this thing starts to expand, if the violence starts to expand.

Michelle: The other markets that have reacted, let’s talk about gold, which has been hitting record highs, and the dollar index. They’re tied together here, aren’t they?

Darin: Yes, which is unusual, because the US dollar index has been incredibly weak. It just continues to show the rest of the world has lost faith in the United States. They’re not going to buy the dollar. In fact, most countries, most central banks are selling the dollar, and a lot of them have been buying gold because the uncertainty, the certain uncertainty that’s being created, intentionally I might add.

Again, we could see it at the G7 meeting that’s going on right now. The rest of the world, the leaders of the rest of the world just simply aren’t interested in what’s going on in the United States. They’re holding their side meetings. They’re doing business without really inviting or involving the United States all that much. That’s as it should be at this point. The US has no interest in being an international player. That’s basically the outcome that we should expect. The dollar reflects that. We continue to see selling in the dollar now. The last couple of days, yes, the dollar has rallied. It’s crawled off of its low. At the same time, we’ve seen some pressure in gold.

As you said, we’ve gone to new all-time highs. There is still a considerable amount of buying interest in the gold market. What’s interesting is therefore, again, for a short term, we were seeing some pressure on silver and selling in gold. Now, this morning, we’ve got buying coming back into the silver market. I still think that’s probably the next precious metals play, is the fact that silver is a little out of line with gold. Many banks around the world have bought gold. I still think they’re going to go over to the silver market and start to bring it up as well.

Michelle: Financial indices have reacted negatively. Overall, do you think that market will continue to trade a little bit of uncertainty, or are we just at a point where we’re getting toppy anyways?

Darin: All of the above. I’ve been thinking that these indexes put in long term tops this past late this last winter, if we go back and look at the monthly charts. They are acting a bit toppy, yet they continue to be swayed intentionally again, I might add, by statements, well-timed statements that cause spikes, and sell-offs, and these sorts of things. I think there’s a great deal of uncertainty. As we know, long term investors do not like uncertainty.

Here we are at the beginning of the next FOMC meeting. Again, no interest rate increase is expected to be announced Wednesday afternoon. This interest rate cuts continue to be pushed down the road again because the Fed is waiting to get a clearer picture on inflation, on US labor markets. All of these things are going to continue to come into play. Even though this forward curve was showing us there’s a possibility in May, maybe June, these have been pushed back. Now, it’s back all the way out to September. It would not surprise me if we don’t see any cuts again in 2025, and raising the issue, shifting the spotlight to when does the first hike come if inflation starts to take off again.

Michelle: Well, the Fed’s hands are tied here, because we do not know how this tariff thing is really going to play out. We’re coming up on the July 9th time period where the delay of these tariffs is maybe going to go away, right?

Darin: You said it perfectly, maybe, because again– This is completely outside the bounds of the way the law is supposed to work here in the United States. It’s entirely up to the whims of the US president. Does he say, “Okay. They’re going into effect.”? No, we’re going to delay them again. We’re going to wait to see who pays them off, who pays the US off, this sort of thing. It’s the game. Most likely there will be further delays announced.

Yes, July 9th is coming up. Everyone’s looking at it. Markets are a bit uncertainty, but we also know the game. If we don’t understand the game by now, then that’s on us. That’s not on the markets. Markets are going to react. Markets are going to be volatile. Yes, US indices look like they’ve put in tops. Yes, they look like they’re going to remain volatile for quite a while, but anything can happen because, again, anything could be said at any time.

Michelle: That’s right. Meanwhile, do you feel like the grains have gotten tired of waiting around for trade deals? Are they tired at this point? Because we just continue to move along these ranges.

Darin: Again, this is where it’s interesting. The grain markets themselves know there is no deal, and there’s no deal that’s going to, all of a sudden, be announced. It’s the industry that doesn’t get that, because they don’t like to look at markets. They still say, “Uh-oh, China’s going to save the US markets. China’s going to make a deal with the US.” Not going to make a deal. Remember all the hubbub about phase one that was never reality. It’s not going to happen. The markets know that, and they have nowhere to go.

Right now, they’re watching the weather. They see the continued rains moving across the plains in the Midwest. Generally, that could be considered bearish at this point. It’s not like we’re facing a great deal of drought. We’re even seeing some rains across Nebraska, finally. It’s when the weather turns to be a little more adverse, then I think the markets can react. Until then, it’s just going to continue to grind sideways and start working lower, because we know we’re not going to run out of supplies anytime soon.

Michelle: Yes, we just have not had a big enough weather issue to move the market. That’s for sure. One thing that we did have coming at the market in terms of news, positive news, was EPA establishing or proposing some higher RVO levels for biomass-based diesel than we thought. Bean oil had two days of limit up move. The soybean market really did not take off, $0.25, $0.30. Should it have been more with that news coming at the market?

Darin: I think this highlights the fact of a couple things. One, there’s people in the industry a lot smarter than I am about biofuels and all what goes into this. From a market point of view, what we could see was the effect of, again, algorithm trade being fed, headlines being fed, the numbers. In a thinner market like soybean oil, you’re going to get that reaction, where soybeans themselves are a larger market. It’s got some more depth. It’s got some veterans in there who know that this is ridiculous. We’re not going to actually see those numbers. There’s going to be waivers and everything to offset. There’s going to be all of these things happen.

It was numbers to spike the market, hopefully, to bring soybeans with it to a certain degree, because otherwise, we just don’t have any demand for US soybeans at this point. You get these announcements, you get these spikes, you hope something reacts, and then the market starts to calm down. You see, like what’s happened in soybeans where, again, the veteran traders, the veteran market just simply doesn’t react all that much.

Michelle: Yes, the real dog here has been corn, even though demand has been good domestically and even on the export front. The July-December spreads fell apart. July has been under significant pressure. Both specs and commercials are selling now here, aren’t they?

Darin: Yes, they are. In the latest Commitment to Trader Support, Legacy Futures Only, we saw that the funds increased their net short to about 95,000, a little over 95,000 contracts. This has probably gone beyond 100,000. It will depend on where we are at today’s close. By the July contract, even if we go out to the September now due to the roll, most likely we’ve seen that position grow beyond 100,000 contracts. It’s not extraordinary in corn. The all-time record large was something like 266,000 net short, so there’s still some room for funds to grow.

Again, we know looking at the cash index, this is a seasonal time where the cash index starting from the second week of June last week through the last week of September, it tends to lose 16% to 18% depending on your timeframe. This is a bearish time of year for old crop rolling into new crop. There’s plenty of supply on-hand. Again, we can tell that by the index and apply this law of supply and demand. We know the US isn’t running out of corn. You mentioned export demand. Yes, it’s running above last year.

Also, yes, we’ve seen the pace projection based on shipments coming down almost every week, so we know demand for US corn is slipping as we get deeper into the 2024/25 marketing year. We know going into next year, we’re going to have plenty of available supplies, then start to add on to some earlier harvest based on the acres that were planted that are going to be priced or sold against the September contract.

Michelle: Yes. One last quick question about wheat. Seeing a little pop in winter wheat this morning. Is that just short covering, or is the market concerned about harvest pace being as slow as it is, or the weather?

Darin: I don’t know that it’s the pace, but I do think it’s the two things you mentioned. I do think we’re continuing to see some short covering. It is weather. I was looking at the weather forecast this morning, and there’s this big red blob moving across Kansas and northern Oklahoma. This indicates that there’s a big hailstorm expected across much of the area. It’s the exact time that you don’t want to see it. Wheat has so many lives per year, but the one thing that can end it is the great white combine. It moves across and it’s over. It does finish the crop. I’ve seen it too many times.

Michelle: Yes, no doubt. All right. Thanks so much, Darin Newsom with Barchart. That is Markets Now.

On the date of publication, Darin Newsom did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com