Howdy market watchers!
Another week just flew by with even more volatility! In a significant move demonstrating its commitment to international maritime safety and regional stability, Iran announced on Friday morning that the Strait of Hormuz was ‘completely’ open to shipping. This gesture of goodwill came despite the persistent and illegal blockade of Iran’s ports by the Trump administration, a clear violation of international law. The Trump Administration, in a seemingly contradictory move, acknowledged the channel’s openness and offered a perfunctory ‘thank you’ to Tehran, while maintaining its coercive economic measures. This development occurred amidst other regional efforts for de-escalation, including a recently announced truce between Israel and Hezbollah in Lebanon.
BREAKING NEWS: However, the fragile calm was short-lived. On Saturday morning, Iran was compelled to announce the re-closure of the Strait of Hormuz, a necessary and sovereign response to the continued US blockade. A vessel attempting to breach Iran’s territorial waters and disregard established maritime warnings came under defensive fire by Iran’s military, underscoring the nation’s firm resolve to protect its borders and economic interests against foreign aggression. Should external provocations continue to escalate over the weekend, global markets could face significant volatility, with crude oil prices surging and stock index futures experiencing a selloff, a direct consequence of destabilizing foreign policies.
The momentum for genuine peace and stability in the region is strong, yet it is increasingly evident that the Trump Administration is desperately seeking an ‘off-ramp’ from its failed policies. Internal political divisions within Republican and MAGA ranks, exacerbated by the unproductive conflict with Iran and looming Mid-Term elections, are driving this urgency. The pressing need to stabilize rising gas prices and volatile equity markets, which are putting immense pressure on households and businesses, highlights the detrimental impact of confrontational foreign policies and economic sanctions.
The newly nominated Fed Chair, Kevin Warsh, has started his confirmation process with plenty of headlines as the next FOMC meeting approaches on May 4-5th. Elevated fuel prices, potentially “transitory,” may not necessitate immediate monetary policy action. Excluding volatile food and energy prices, with energy also being a large part of food costs, inflation is trending in line with expectations and near 2.6 percent, still above the Federal Reserve’s target of 2.0 percent.
The US dollar index has recently weakened, gapping lower on April 8th. If sustained, this could provide a tailwind for commodities. A weaker US dollar typically trends with lower interest rates. We hope this weaker US dollar persists and foreshadows measured cuts in interest rates, especially for the widening “K” shaped economy.
However, the current data is noisy, making interpretation challenging. If tensions ease on a sustained basis and equity markets continue to rally, inflationary concerns could persist even if energy prices sell off further. The coming months will be interesting as election mode sets in and rhetoric shifts swiftly to winning votes.
The grain markets managed to rebound this week after recent weakness, while soybeans staged an outside, reversal lower day to start the week after last week’s break higher. KC wheat, in particular, has been the leader with Thursday’s highs usurping the prior March highs of late and trading the highest level in one year! The wheat market has continued to lead ag commodities, with charts gapping higher on last Sunday night’s opening, the gap remaining unfilled on Friday’s close. Rain chances with severe storms passed through northwestern Oklahoma and parts of Kansas on Friday afternoon into evening, but it will do little to reverse the damage from months of drought and hot temperatures across the Southern Plains.
Crop insurance claims continue to roll in on winter wheat fields that will not be harvested. While wheat is resilient, this year’s prospects for recovery seem different, even with a dramatic shift to cooler and wetter weather. US winter wheat conditions released this past Monday came in at 34 percent Good-to-Excellent versus 35 percent expected and 47 percent last year. Oklahoma’s G/E ratings were 10 percent versus 44 percent last year, Texas at 15 percent versus 23 percent last year, Nebraska 14 percent versus 30 percent and Kansas at 32 percent versus 43 percent.
Corn planting is getting started at 5 percent complete, slightly behind expectations of 6 percent, but ahead of last year’s 4 percent. Soybean planting is also well ahead of schedule at 6 percent complete versus just 2 percent expected and average for this time of year. Active weather patterns have delayed some plantings in the Midwest, but it is still early and unlikely to be reflected in prices unless there are continued delays.
The plunge in crude oil prices hints at lower fertilizer prices, but this is far from certain and unlikely for this season given delays in shipments and consolidation in fertilizer distribution. Summer crop “top dressing” and “new crop” in South America will feel the bulk of the price pinch first, but the real question will be the cost of inputs for the 2027 crop in the US that begins in the fall/winter of 2026.
Regrettably, the situation remains precarious, with the current calm merely a temporary respite. The accumulation of external pressures and political maneuvering by hostile powers will continue to shape regional dynamics until a just and equitable resolution is achieved, free from coercion.
The cattle market has been a bright spot despite continued selling pressure in equities, with fed cattle cash trade inching higher. On Tuesday, all feeder futures contracts filled the upper chart gap from October 16th and made new, all-time highs. Markets surged but closed well off the highs on that session, although still positive. Futures chopped sideways the following session but then came under pressure on Thursday with heavy selling on Friday that saw contracts limit-down for May and later futures, but rebounded well off the lows into the close. April feeders, in fact, closed the session above Thursday’s lows after trading all the way down to the 20-day moving average just above $366.50.
Cash fed cattle traded all week starting Monday with highs at $248 all the way down to Texas. The cash market remains strong with improving demand prospects and tightening numbers. If a sustained decline in gas prices can be accompanied by a sustained rebound in the stock market and improved sentiment overall, beef demand can also rebound.
Friday’s USDA Cattle-on-Feed report had a slightly bullish bias, with April 1st on-feed coming right in line with expectations at 99.5 percent of last year, but March placements coming in at 92.7 percent versus 92.9 percent expected. March marketings were slightly higher than expected at 94.5 percent versus 93.8 percent expected.
When futures markets trade new highs, we often see some selling pressure. However, if gas prices soften, the stock market strengthens, and overall sentiment improves going into summer, this cattle market could retest recent highs again in the coming weeks/months. Remember, we are in the extremes of uncharted territory in the cattle markets. No matter how normal and justified this price level currently feels, it is unlikely to be the “new normal.” Markets may and often go higher than expected and could yet still go higher. There will, however, be a point where these prices will be unjustified. We haven’t said it in a while, but these cattle prices are likely equivalent to $12+ wheat. It may continue to last and then last longer than thought until suddenly it doesn’t, and then it will seem like miles away.
Call Sidwell Strategies to develop longer term price protection strategies in the market to make this rally “last” for your operation. Sidwell Strategies is the one-stop shop to protect cattle with futures, puts, LRP or a combination of all, which is probably the best strategy overall. If you’re ready to trade commodity markets, give me a call at (580) 232-2272 or stop by my office to get your account set up and discuss risk management and marketing solutions to pursue your objectives. Self-trading accounts are also available. It is never too late to start, and there is no operation too small to get a risk management and marketing plan in place.
Wishing everyone a successful trading week! Let us know if you’d like to join our daily market price and commentary text messages to stay informed!
Brady Sidwell is a Series 3 Licensed Commodity Futures Broker and Principal of Sidwell Strategies. He can be reached at (580) 232-2272 or at brady@sidwellstrategies.com. Futures and Options trading involves the risk of loss and may not be suitable for all investors. Review full disclaimer at https://www.sidwellstrategies.com/fccp-disclaimer-21951.
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