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Paragon Commentary

Futures File: Iran & USDA

Jan 10, 2020

Iran: All Smoke, No Fire

On Tuesday night, Iran retaliated against the United States with a series of missile strikes against Iraqi military bases that housed U.S. troops. The attack was in response to the U.S. assassination of the Iranian military leader, Qassem Soleimani, who was killed by a U.S. drone strike last week.

In the initial aftermath of the Iranian attack, financial markets saw the counterstrike as a significant escalation and moved accordingly; U.S. stock prices plummeted to a three-week low, oil exploded nearly $3 per barrel over a nine-month high, and gold shot nearly $40 per ounce higher to a six-year high.

But as the smoke cleared, a different picture emerged: the U.S. and Iraqi forces claimed no casualties and President Trump stated that Iran “appears to be standing down.” By the end of the week, the only significant U.S. response was levying additional sanctions against Iranian businesses and leaders, a sign that the situation may be calming down.

As a result, the markets moves in the aftermath of the report were undone and swung in the other direction. By Friday, U.S. stock index futures had made all-time highs, while gold finished the week with a loss, trading near $1560 per ounce, while February oil fell near a one-month low, trading for $59 per barrel.

 

More Corn and Soybeans than Expected

The USDA’s January report, issued midday Friday, has been long-awaited as a final tally on 2019’s tumultuous crop year.

While many market watchers were anticipating another cut to the estimates of the 2019 harvests of corn and soybeans, the USDA shocked analysts with a significant increase in last fall’s crop size. Overall, the USDA tallied the 2019 corn harvest at 13.69 billion bushels and soybeans at 3.56 billion bushels, with yields of 168 and 47.4 bushels per acre, respectively.

These bearish figures initially sent prices downward toward one-month lows, but corn and soybeans quickly recovered, a possible sign that bargain buyers had swept into the markets. By midday Friday, March corn was worth $3.85, and March soybeans traded for $9.45 per bushel.

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