Crude Breaks Lower — But Cattle & Soy Oil Tell a Different Story

Added: 2026-05-28

[00:00:00]The views and opinions of this program are those of the hosts, guests, and callers. There is substantial risk of loss in trading futures and options, which you should carefully consider prior to trading.

[00:00:11]Well, plenty of dynamics in the market trade at midweek as we near the end of the month, post Memorial Day. We saw the cattle complex show a good rebound on Wednesday. Mixed action in the grains, a little bit of green in the soy complex, but some pressure in the wheat trade led by Chicago futures to the downside.

[00:00:29]Crude oil also under pressure as well on the day. A lot to talk about with Mike Zuzalo from Global Commodity Analytics.

[00:00:36]Mike, good to have you back with us this week, sir. And uh again, you know, more dynamics and movement in this market is you know, the more things stay the same, uh the more things stay the same, I guess, is kind of where I'm going with that. I mean, just some volatility and and a lot to a lot to unpack here. are kind of moving around in this market trade. Mike, >> yeah, I changed my alarm clock uh music, Jesse, to uh You Got Me, babe, by Sunny and Share to match up with Groundhog Day on Wednesday morning. I I don't know about you, but I am so tired of talking about crude oil and weed at this point. I'm just ready to like branch out into some other type of exotic commodity at this stage. But, you know, we got a ceasefire that was supposed to go two weeks. It's we're on our seventh week. Uh Goldman Sachs came out this week and said our global inventories of oil is below 100 100 days now to consumption and to meet demand. The visible inventories that you can look at by satellite is down around 73 days of demand. That is a record low going back to them doing this going all the way back to 2018. Um the straight of Hormuz is being mined by Iran as of 24 hours ago. Um and then you've got a situation where 10 vessels per day got through I think in the last two days in a row. That compares to 120 to 140 vessels before the conflict per day. And yet here we are sitting with another $5 hit to the crude oil market hitting major trend line support levels on the monthly chart and wheat willingly follows. And the only difference we had today was a little bit of a shift as you say in the soy complex which we'll do a deep dive on together.

[00:02:32]>> Yeah. Well, let's start with crude oil.

[00:02:34]Uh to your point, I I think we're all getting tired of talking about crude oil, but unfortunately we're going to have to probably for a little while longer. Let's take a look at this monthly chart. You mentioned uh off the top some support levels here, testing those, etc. Another $5 pullback or so and WTI futures. And a lot of it just seems to be on optimism that we're going to find a peace deal that we haven't found yet here, Mike.

[00:03:01]>> Well, that's it. I mean, I think this is probably the sixth or seventh time we've gone through this and I think it's pretty clear and the producers I work with that are out there in the fields right now or out there getting their pastures and moving cattle right now getting their pastures ready realize the difference between funds versus fundamentals. And I think this chart helps show a lot of what's going on right now. Um, in fact, all the charts do, I think, in today's video. So, it's one of the better videos, I think, when it comes to more cohesive mindset to are the investment funds in control or are the fundamentals in control. And by what I laid out with the world oil supplies and the vessels, I mean, we're talking about a scenario where the Middle East crude and product exports as of last week um were about 7.3 million barrels a day. In April, they averaged about 9 million barrels a day. Before the conflict, they were over 21 million barrels a day. That's not changed at all. And even if you add another nine or 10 million barrels from someplace else, like the US or the Red Sea or demand rationing, you're still down 3 and a half to four and a half million barrels a day that will never make up. And that's why we talked about the billion barrels of lost oil. and we're starting to get into the second billion barrels of lost oil as we get into the middle of June. Um, in this chart, in my opinion, if the fundamentals were in control, would be running up above that new support level from May 15th above 11050.

[00:04:42]Instead, we're going back down to that major orange trend line. It's been tested four times in the last four months. If we violate that, Jesse, then we've got a situation where we're probably going to go down to that support line from mid March of 8050 and test last month's lows. So, if somebody says to me, what's the downside in the wheat? I would say there is a similar trend line in the soft red wheat that now that we've taken out the trend line in the soft red wheat and the hard red wheat there's another one below about the same percentage down uh than what we you know what we lost last time. Same with corn. The April lows are now being looked at uh by the trade I think and the investment funds if we lose this trend line in the crude oil market.

[00:05:30]Well, as we look at another chart here, let's layer in wheat with crude and also corn and soybeans. And what are some of the correlations that you're maybe seeing here? I think this helps illustrate a little bit more about what you're talking about, Mike.

[00:05:45]>> Yeah, this is a neat chart because, you know, you and I look at the WTI versus the soft red wheat and it it that the correlation between those two had broken apart as of last week because the wheat stayed strong. Now, keep in mind, I'm building a case here with this chart, especially with the idea that the only other thing that would be taking the wheat down or not allowing the wheat to fight the crude oil break like the soybean oil did today is what I've been hearing, and that is, well, the US wheat crop, it's already baked in as far as how bad it is. There's ample supplies, and we're going to have no problems whatsoever taking care of the world when it comes to the wheat side of the equation. Clearly, it we're better off on the supply in wheat than we are on crude oil. We're not in a net deficit right now, but we still, I would argue, are seeing supply fall faster than demand. But this chart, if you add on top of the wheat and the crude oil, which crude oil is the white line, the wheat is the bar chart. In between those two is the corn, which is in the uh yellow, and then the beans are in the blue. You see that? how closely that corn is running with the wheat the and and the WTI crude. And so you can see very clearly that the corn fundamentals by themselves, supply demand fundamentals really are not being looked at by the by the way this chart looks right now. And we've got some more charts to look at on the corn. But I really like this chart because it it it puts on top of the wheat and the crude what the beans and what the corn are doing. And I'll say it very plainly right now, Jesse at the top of this show. People have asked me, you know, are you worried about the corn? Are we going to get another chance to sell the corn? And what I've said to them very vocally all year long, and so far it's been accurate, I'm not going to worry about the corn if the beans are going higher because the beans still have, except for that bofuel demand, still have the toughest, most questionable fundamentals, especially at this price level. And we'll talk more about that, I'm sure, in a few minutes.

[00:07:49]>> Yeah, we I I want to get to that, but before we do, I think to help kind of make your case here some more, let's take a trip to to Bean Oil Land here and talk about one of the bright spots uh of the trade here uh on Wednesday. And really, I'm going to argue it's been a bright spot for quite some time outside of some volatility. And that's what's happening in soybean oil. I mean, talk about the move that we've been seeing really throughout the year here in soybean oil, Mike.

[00:08:21]>> Yeah, my bet would be that this soybean oil chart and the corn chart would look a lot more similar with one another if it weren't for the fact that the Senate has not done anything with that year- round E15. I think this has given the funds the ability to buy the beans and sell the corn. And even though you've got several big pieces of fundamentals that would suggest don't do that, especially given the acreage, given the fact that we don't have any Chinese business yet, and a couple other fundamentals as well. But this chart, you're right. I mean, we started out on Wednesday, that last bar that shows 7518 on the chart here, and this was done before the close, but that bar was red.

[00:09:04]we were negative and we were testing that purple trend line that goes all the way back to the lows from the end of last year. That is the uh that is the custer line. That is the line in the sand that turns the trend from positive to either sideways or negative. And so what we saw was the soybean oil tested this trend line. There was short covering and all of a sudden we were making new weekly highs um in in this kind of an environment with the crude oil breaking. so abruptly. So, we've seen a big divergence now between the bean oil and the crude. It was before this this move here currently, Jesse, it was really about the crude oil and the bean oil doing pretty much the same thing, but now we're trying to break free. That's going to be a really interesting dynamic as we get to the end of this week and into next week. Can the soybean oil do it all by itself if the crude oil doesn't come back?

[00:10:01]We're having a conversation with Mike Zuzalo from Global Commodity Analytics here today on Market Talk and uh thinking about soybean oil. One other chart that I think is very interesting, we talk a lot about the funds versus the fundamentals. You mentioned it earlier and you know there's been a lot of looks into the managed money positions in many of these commodities. What does it look like when it comes to soybean oil, Mike?

[00:10:28]Yeah, and this is where the contrast really comes in and you framed that really nicely as you always do. The managed money net futures and options positions in soybean oil is still a record net long going all the way back to when the commitment to traders report was started and the CFTC started keeping track and and soybeans are well up there uh near their record highs. Corn is still elevated near uh one of its big records from a couple years ago in 2022.

[00:10:56]But the wheat, by contrast, is a negative right now. The funds have gone back to being net short the wheat complex. And I think that's a real mistake by the funds because they're banking on supply and demand fundamentals coming around and that supply from other areas that the US can't make up. I think that's going to be a problem area for them in 30 or 60 days. Maybe they'll catch wind of that or understand that before then, but we're harvesting earlier than than what we would normally do in hard red wheat country. I've talked to clients in Indiana and Illinois and they're looking at probably harvesting earlier as well.

[00:11:32]Um, but this managed money position is a real issue and I think this helps support the idea that soybean oil is moving mainly on the funds assuming that the bofuel demand is only going to increase. Is that going to be right? And is that going to be put up against China buying more US beans or not buying more US beans? And I think that makes this week's export sales and next week's export sales extremely important. So several factors here that the soybean oil has got to be challenged with most of them among them is this uh net long position. That's a record by the funds.

[00:12:10]All right, I want to go from soybean oil land and take a trip around the world to talk weather in Europe and the Black Sea region because I think that's another layer to this market dynamic picture that we have right now. So talk about how this could play in especially on the wheat side because as we talked about at the top of the show, Chicago wheat was under pressure on Wednesday that kind of pressured Casey and spring wheat. You mentioned, you know, there's a lot of talk about the weather situation in the United States is baked into the market and things of that nature, but but how could the weather outlook in Europe and the Black Sea play into the discussion for wheat, for corn even, etc., etc. >> Yeah, this map is the moisture anomaly map, like what it what it is versus what it is normally in terms of soil moisture currently. Jesse. And what I really liked when I did this map was, and this is 0 to 40 cm, and this is the current one. If you look at the bottom left corner, you see it's dated May 27th. I went out to June 3rd. I went ahead and the software that I purchased allows me to go out seven days using a mixture of model data to suggest to me what is the anomaly going to look like a week from now. almost all these countries it looks worse a week from now. So the idea that we're going to have more supply of wheat and corn in some of the biggest European and Black Sea areas of wheat and corn country in the northern hemisphere I think is a bridge too far right now. I just cannot see it given some of these moisture anomaly maps that I'm looking at. I mean from Poland to Ukraine to Russia and then in in Western Europe, France and Spain, these are huge countries for grains as we know and I think this moisture anomaly map is going to become more and more important much like the center west Brazil map is going to become much more important. So I'm really focusing in on Mroso Brazil. I'm really focusing in on the vulga region of Russia, which is what I highlighted in the green area, the green square of where those that red line matches up.

[00:14:26]One of the worst areas on this map is one of the highest level of production for the Black Sea in Europe when it comes to wheat and grains.

[00:14:36]>> Let's talk uh corn a little bit more before we get to the livestock conversation. And I know some have been mentioning uh this week that corn has been testing some support levels here.

[00:14:48]Maybe some concern that there could be further downside momentum in US cord futures for instance. But thinking about that tied in with the cash prices globally and more what's what stands out to you any other final thoughts in the corn market for us this week, Mike?

[00:15:05]Yeah, the big thing I'm noticing is, and I'm not sure if it has to do with what the map we just looked at, Jesse, but the the Ukrainian corn price, which doesn't show up on this, it was just updated on my system today, and it's still right at an 8 and a half month high at this stage of the game because of tight supplies and also pretty strong demand. It's sitting around 240 a ton, but look at the French Bordeaux corn price jumping to almost $276 a ton. You know, when you look at us in red at the Gulf of Mexico, we are right with Argentina and then there's nobody even close to us until you get to maybe Brazil. But Romania is running 240, Ukraine is 240, Europe is 275.

[00:15:51]You have a lot of reasons along with the ethanol demand that we've had even without year round E15 and the export inspections that we saw this week again coming back from the holiday. a lot of reason to think that the corn market does not have a lot of downside when you think about the supply demand fundamentals and get outside the realm of the investment funds.

[00:16:13]Let's talk livestock trade. Cattle had a really good day Wednesday. We've kind of come out of the on feed report from the weekend and the selloff last week at the cattle trade and we've started to rally back. I I have to think that maybe the fundamentals are are taking over the funds here a little bit and starting to come back into play. Talk about this a little bit. Let's frame it up first.

[00:16:35]Cattle versus hogs as well. What are some dynamics you're watching this week, Mike? Yeah, I really like this chart because the hogs did bounce with the feeders and fats and actually in in terms of actual move higher as the June loses some of its open interest because it's getting closer and closer to expiration, it really scooted and that was due to the cutouts and especially the belly cutout. It really started to go back higher after making some multimonth lows in the last week or so.

[00:17:04]So this chart is very supportive especially in the aftermath of that really negative Catalon feed report last Friday. And I I just have to say on the Catalon feed report if we have the hog market bottoming like I hope we have and did um at this stage of the game um and we've gotten that big of a placements number of 106% and an on feed number now of almost 11.6 million head and we can find a low here. Um there it's going to be really tough to create or manufacture new bearish news in my opinion, Jesse, to take these recent lows out. So I'm walking on eggshells right now to the end of the week, which is also the end of the month. But if we finish strong, I think this could be a low both technically and as you say fundamentally when it comes to the livestock sector because things don't add up on that Catalon feed report. If you ask me, >> I would concur on that. I think uh we're all in the same camp. A lot of questions with that on feed report and thinking about the cattle trade with the cash roped in here versus futures. I will say as of Wednesday afternoon, not a lot of cash activity yet. A light trade reported in Iowa at 256. But you know, even with the drop last week in futures, cash remained relatively stable. And that's been a key thing that I've been keeping an eye on and asking folks about is the strength of cash supporting this cattle complex even as futures see volatility. Mike, >> yes and I would I would add to that agree wholeheartedly and I would add to that is with when you look at the channel on this chart of and that that would be the channel for the futures market the white line is the five area cash steer price. But if you look at the channel, the thing that I want to do right now is suggest to the audience that we don't need to go below 250 until we get to July 4th. But what would take us back down to the bottom of that channel. In other words, we could go from essentially 250 down to 220 or a little under 220, lose $30 essentially and still be in a very strong uptrend in the live cattle futures. What would do that? I think the the biggest and most flagrant potential feature would be the stock market gives up and and consumption and and the uh the retail side of the market really gives way because I was astounded when I looked at the retail report by the USDA at the grocery stores last week. Beef is still winning and beating the other meats at this point. whether it's hamburger or whether it's some of the other cuts that have been, you know, put into place for summer grilling season, the featuring uh level was still up 78% versus the prior week when it came to the beef side of the equation. So, I think the thing to keep an eye on is Wall Street more and more because now we've had this feeder correction. And I I have to say I'm sure in my mind anyway that the corn market breaking and the wheat market breaking helped give the feeders the ump on Wednesday as well. But that spread looks very very healthy now. In other words, I could see for a period of time where feeders and corn could both go higher and they don't have to play off of each other during this these summer months.

[00:20:25]Especially if we get the rains that we're supposed to get in some of the key cattle country states like Colorado, Kansas, Texas, Oklahoma, then we don't have to worry about forced liquidation again, which I think that's the only explains the cattle on feed report to me to get that big of a placement stump.

[00:20:43]17% more in Colorado, 5% more in Kansas, 8% more in Texas. That was that was about, you know, 5 700,000 head of the 1.7 million head that we placed. That said to me that was drought. And it was all across all different weight groups, too. So, I think the drought really played havoc. If that drought goes away, that should help support the feeders more, I think.

[00:21:08]>> Absolutely. Spot on. when you when the grass is burned up, you you got to figure something out. And that that seemed to be the culprit there uh with that on feed report. Mike, great stuff.

[00:21:19]Excellent as always. If folks want to reach out to you there, globalcom or global commodity analytics, they can go to the website. How could they do that, Mike?

[00:21:28]>> Yeah, globalcomress research.com.

[00:21:30]Globalcom with 2mms research.com. And keep in mind clients and subscribers are going to see another half a dozen charts tonight in in addition with some analysis on top of what we looked at. So please sign up for twoe free trial and see what you think of us.

[00:21:45]>> Globalcom with 2M research.com. Mike Zulo, Global Commodity Analytics. Have a great week, sir. We'll talk to you next week.

[00:21:53]>> Thanks, Jesse, for having me.

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