Markets Now Closes 6/1 Grains See Fund Selling Divorcing from Crude Oil: Cattle Fade NWS Case

Added: 2026-06-02

[00:00:00]Welcome to Markets Now. I'm Michelle Rook with Garrett Toy of Ag Trader Talk, and we did see mostly lower price action today in the Ag space except for the cattle market. All right, Garrett, let's talk about the grains first of all. We had funds liquidating pretty much across the entire grain complex. Corn made new lows for the move. We divorced from crude oil. It was screaming like $6 higher at one point. Why? Why did we divorce finally?

[00:00:23]>> Well, the the IRGC again, you know, you you have two things. You've got the futures market, and you've got the physical market. And you know, at the end of the day, you know, we traded crude under $90 in last week.

[00:00:35]You know, we we 10 days ago President Trump made the comment that we were 95% close to a deal. Um kind of setting everyone to expecting that we'd have a deal in the in the last week.

[00:00:47]Um headlines this morning were that the IRGC said they're no longer negotiating with the US as long as uh attacks on Lebanon continue. Um they consider that a uh uh a uh violation of the ceasefire. And there's also reports over the weekend that Iran's president resigned. So, um we don't really have a firm grasp as far as um you know, who we are negotiating it with as far as leadership is concerned.

[00:01:12]Um and really I is a struggle to find details of this you know, memorandum of understanding here uh between the two countries as far as you know, what we know the US side, they want get rid of the nuclear weapons uh and they want the Strait of Hormuz to be reopened. So, uh as far as Iran's demands are not really sure, but told.

[00:01:31]So, um it's neither here nor there, but uh at the end of the day, I think that um you know, crude rallied. I think the market is kind of past the point where you know, the the worst is already been seen as far as bombs dropping and explosions and and concerns about you know, destruction of infrastructure.

[00:01:50]Um you know, and the inflation trade is still there, and that's a marathon, not a sprint. Um and ultimately the like I said, uh you know, the physical supplies are not futures. So, uh we had another big big week of SPR draws. By the end of next week, SPR will probably be below the Biden levels and and we're pushing towards the 1983 all-time lows when the SPR was opened.

[00:02:12]And you starting to see these draws in the SPRs of foreign countries, Asia, Japan specifically.

[00:02:20]Their crude inventories are hitting historically low levels as well. So, then we also have distillate stocks, which is diesel fuel, at its lowest levels in in 20 years. So, the physical markets are saying one thing, the crude market is saying another.

[00:02:35]You know, we're trying to control the prices of crude with these SPR releases and whatnot, but ultimately, the Strait of Hormuz is now closed for 93 days and and we're not, you know, we're constricting supply.

[00:02:46]>> Yeah.

[00:02:47]Seasonal's though, starting to turn lower, was that part of the push you thought we saw or the pressure in the grain market plus the fact we don't really have a significant weather threat right now?

[00:02:57]>> Absolutely. You know, it's it's time.

[00:03:00]You know, in in our weekly net letter that we put out, you know, we we we we had targets for old crop corn and and and they didn't hit, but you know, we just our comment was it's time to to move old crop corn. You know, it's it's you know, I I I think the funds are sitting here looking at this big old crop corn carryout. Basis is weaker last week. Commercials are starting to sell corn or short their DP positions.

[00:03:22]And you know, we're just waiting on the farmer to to move and I think you started to see some of that with you know, guys that have produced it you have strong start to planting. I know there's some germination issues. The the month of May was fairly cool.

[00:03:37]So, it wasn't perfect in you know, in a lot of places, but you know, the the 60,000 foot view is that it's good enough and that you know, potentially, you know, the size of this old crop carryout could temper any weather effects um you know, going forward because you know, we have to have X amount of, you know, production loss to offset the carry in. So, you know, the funds are just getting out of the way.

[00:04:02]You know, it was started out of feed grains. You know, beans have been, you know, beans haven't done the chart damage that corn has done.

[00:04:08]>> No.

[00:04:09]>> But, you know, all these spreads are weaker. July subs, subs these, you know, July and Nov bean spread traded to a, you know, 8 and 1/2 cent carry today.

[00:04:16]That's historically wide.

[00:04:19]And that's [clears throat] the big thing that concerns me about this bean market is that, you know, the funds have liquidated corn. They're still rather rather sticky in soybeans. And as you start this index roll here this week, the fact that, you know, now it's costing these longs the roll to the November rather than an inverse, you know, will they head for the door and and beans could be the another shoe to drop.

[00:04:39]>> Right. How long are they the funds still in the bean market? And how much downside risk if they continue to liquidate in the entire complex? Cuz they're long in beans, meal, and oil, aren't they?

[00:04:50]>> Yeah, they are. Even in corn, I mean, you know, even we liquidated, you know, 80,000 contracts last week, it'd still be the largest long for this week in history. So, it's the same situation in beans. It'll be the largest bean long in this time of year.

[00:05:04]Um it's still, you know, you really, you know, you've got a net fund position, right?

[00:05:09]So, the net fund position is the net of the longs and the shorts. And you know, in reality, given the inflation trade, I'm not sure shorts really want to get too involved in this market per se. But, you know, the short positions within this net fund position is is relatively small. So, they they have a lot of ammo if they choose to use it. But, right now it's just the length getting out of the market. So, the longs are still pretty big.

[00:05:36]And we've all heard the narrative, you know, wheat when last time crude was $100, that sort of thing.

[00:05:42]But, that's what's kind of driving the trade.

[00:05:45]>> Do you think there's also been some impatience on the part of the trade that we haven't seen any developments on China or any purchases yet?

[00:05:54]>> Um, it's been a concern of mine. I I may be early on it, but you know, the the one thing we pointed out in the past excuse [clears throat] me, is that whenever we've had negotiations with China or trade deals like this announced, um, you know, we typically see a symbolic purchase by the Chinese.

[00:06:13]And, um, you know, that hasn't shown up yet. So, whether we have a deal or don't have a deal, you know, typically it's a sign of goodwill that, you know, they they have a deal, but, um, you know, the cloud of war cloud the cloud the fog of of the trade war, um, the South American crop has a pretty significant tail, so maybe that's what's delaying things a little bit. So, maybe it's not time to get concerned about, but um, you know, in the next four weeks we still have yet to see a uh new crop Chinese purchase, then I think the market will probably get a little testy.

[00:06:45]>> So, July corn is corrected, I think, over 45 cents from the May high. You've got each or W July contract over a dollar lower than that period of time. Do you think we have a lot more downside risk in this market from a price perspective?

[00:07:02]>> Well, I mean, here's the thing is is, you know, we're we traded today's Monday's low at 440. The the trend line off the January lows is 437.

[00:07:11]Um, you know, I think the ultimately, I mean, the September contract is the one to keep an eye on once that farmer movement.

[00:07:18]Um, if you look at a seasonal chart of December corn since 2015, um, outside of the years where we have a weather problem or, you know, potentially this year the setup was inflation uh with with crude being where it was.

[00:07:30]Um, you know, where we trade above five and a quarter, all the other years trades, you know, 425 or lower by harvest time. So, I'm not sure necessarily December corn given the new crop S&Ds necessarily warrant that, but you know, a 1.9 to 2.1 billion bushel carryout, you know, that movement of grain into harvest could be the catalyst that that pushes down to those levels if we have a normal crop. We're in the third inning right now. We just got done with planting.

[00:07:58]We're not even you know, we're kind of starting to get a early glimpse at some pollination.

[00:08:04]You know, pollination forecast. We'll get our first look at crop conditions this afternoon which I I you know, there I don't give a whole lot of warning, but it's it's it's a decent check mark to look at past years, but you know, I I think that seasonally we get into the third week in June.

[00:08:23]You know, this looks like at this point it's setting up to be a typical seasonal year where highs are set May and June.

[00:08:29]Last year we set the the highs in February. It was a typical year, but at least it gave us an opportunity. And given you know, the commitment of traders it really looks as let the farmer did a fairly decent job of of selling these highs into the the fund long that wanted to be there. So, I think that they're in a better shape than past years. We're not all you know, we're not all high-fiving every every each other because you know, input costs are still through the roof and we still have to deal with high fuel prices, but you know, it's a lot better. If it weren't for this Iranian war you know, three months ago, the corn outlook picture would have been completely different.

[00:09:08]>> True. True. And let's hope producers did get some of those sales made. All right, cattle market up here today 11 feeder cattle futures just consolidating here.

[00:09:17]Are the funds done liquidating for now or not?

[00:09:20]>> Yeah, I mean it feels like we're consolidating you know, we're done consolidating. I mean cash is still a premium to the board now I should say still is is a premium to the board now. It's a it's a change in direction here.

[00:09:34]You know, again uh sound like a broken record, but I'm my big concern is still the the consumer. Um you know, everything you see out here is credit card credit card um delinquencies are increasing, high fuel prices, um everything that points to uh the spendability of the dollar is diminishing.

[00:09:53]Um so, when that type of thing happens, then food choice becomes a little bit more critical.

[00:09:59]Um and uh you know, maybe we can get enough discounts from the from the packer. I mean, I am seeing some retail sales out there that are knocking the the price of steaks down to like $16 a pound, but you really have to be a thrifty shopper to find them.

[00:10:11]Um but and then you know, it's it's kind of interesting is that um you know, we had the the new world screw worm headline last week, and we really didn't react a whole heck of a lot in my opinion.

[00:10:22]Um and uh so, I mean, it feels like we're just waiting for this next shoe to drop.

[00:10:28]>> Uh let's talk about the hog market because August hitting more 6-month lows. I know you're more closely watching the December contract, but the funds are almost flat here. Why can we not find a bottom to this market, Garrett?

[00:10:41]>> Uh it really is, and it gets sometimes it just comes down to order flow and where the the funds are underwater that I mentioned earlier, but um you would you would think that um you know, considering beef prices that the consumer would be be be in here um buying pork hand over fist because of the discounts that are seen out there, but um the problem is I think, you know, underlying this that's why I kind of focus on Christmas hogs more than anything.

[00:11:06]Um it it feels like it's kind of a bit of an oversupply situation that we're trying to work through right now. Um and trying to get the herds down. So, I mean, um obviously the the the cycle in hogs is a lot shorter than in cattle. Uh looks like the last 2 years of cattle prices, you know, the the hog producers rewarded that with increased production, and ultimately it feels like it's kind of coming to a head here right now, but um you know, what down nine of the last 11 days in hogs, it's it's been ugly.

[00:11:33]Um, but um, you know, we I I I lived through '98, '97 and and um, you know, we're even though it's bad right now, we're a heck of a lot better than what we were at point.

[00:11:45]>> For sure. All right, thanks so much.

[00:11:46]That is Garrett Troy with Ag Trader Talking Markets now.