Takeaway

The presenter argues that grain markets face near-term downside pressure from the energy sector and a lack of new fundamental drivers. With funds already holding near-record long positions in corn and soybeans, he suggests a pullback is likely, especially as harvest progresses. The more fundamentally bullish story, in his view, is in the livestock sector, which could attract investment capital unless high fuel prices finally curb US beef demand.

What the presenter said

• Grains are seeing spillover pressure from the energy sector, influenced by geopolitical headlines regarding Iran. [00:43]
• Funds are unlikely to add to grain length given they already hold record long positions in soybeans and soybean meal, and near-record longs in corn. [03:37]
• The presenter sees no fundamental backing to pull more money into grains now and suggests they need to sell off, particularly during the fall harvest quarter. [04:09]
• Longer-term concerns in grains persist, visible in deferred futures spreads for both corn (May-July) and soybeans (March-May, May-July). [03:12]
• Investors are likely waiting to see how South America's planting and growing season develops before committing new capital to grains. [03:25]
• The presenter believes the livestock markets are fundamentally more bullish than grains in the short term. [02:47]
• However, sustained high fuel prices could finally crack US consumer demand for high-priced beef, which is a key risk for the cattle market. [11:57]
• The market is growing tired of Russia-Ukraine headlines, which are now triggering algorithmic selling without reflecting a change in fundamentals. [08:21]

Trade ideas

• None stated. The presenter's market view is that grains are due for a pullback given heavy fund positioning and a lack of new bullish inputs, while livestock markets have a more bullish fundamental setup.

Levels and data cited

• WTI Crude Oil: Cited as having been "north of 105".
• Diesel: Noted as making "new record highs".
• COT Report: Funds hold a record long in soybeans and meal, and a near-record long in corn.
• USDA Exports (this morning):
  • Soybeans: 62.5 million bushels.
  • Corn: A little over 40 million bushels.
• Federal Reserve: Raised interest rates by a quarter point "yesterday," the first hike in three years.
• Weather Forecast: The next 6-10 days are expected to be clearer and more harvest-friendly.

Risks and what would invalidate this

• Spillover pressure from the energy sector due to geopolitical headlines.
• Algorithmic selling in response to geopolitical headlines, regardless of fundamental shifts.
• A potential rotation of money out of equities and into commodities.
• High fuel prices could eventually break US demand for high-priced beef.