What's the Connection Between the US War on Iran, Fuel, Fertilizer, and Food Prices? (Part 2)

• According to the March 1 Cattle on Feed report, the US cattle herd is not growing. 

• That being said, the amount of meat available remains stable due to cattle heading to the processing plant at heavier weights. 

• The changed dynamics of global energy and grain sectors could create a change in protein demand, most notably poultry over beef. 

I left off last time talking about how the US war on Iran was changing the dynamics of the global grain supply and demand situation. But what does that mean for the US livestock industry? 

Fewer Cattle: The price of feed corn has also been rising. Though the National Corn Index is the price received by the producer rather than the price paid by end-user, the assumption is the latter has likely gone up more than the former. Still, using the Index as a guide we see it has increased 14% from its recent low monthly close of $3.7318 at the end of September through this past Friday’s (March 20) price of $4.2443. Given this, and the idea the cost of feed corn is going to continue to rise as the US produces less this year, the US cattle industry has no. incentive to expand. If they are to be believed, the March 1 Cattle on Feed numbers showed 11.55 million head, the smallest March 1 number going back to at least 2017, consistent with USDA’s January 30, 2026 Cattle Inventory report that came in at 86.2 million, the lowest since 1951. 

High Beef Prices: What will this do to the price of beef? Theoretically, if the US cattle inventory continues to run at 75-year lows then we would expect beef prices at the counter to stay high. This would seemingly be proven by the latest USDA reported boxed beef numbers putting choice just over $400 and select near $393. But these numbers come with an asterisk because, again, they are reported daily by USDA. Even acknowledging this shortcoming, all it takes is a visit to the meat counter to see beef prices remain higher and could go higher. My friends in the cattle/beef industry like to remind me it isn’t all about the number of head, as supplies have stayed solid due to the cattle heading to the packing plant, according to one, “as big as elephants”. This has kept the amount of beef in US cold storage facilities consistent month to month, while running below last year’s numbers. The bottom line is the US beef market has stayed high because of surprisingly strong consumer demand the last number of years. But will this continue if US consumers have to make the choice between eating steak or filling up their vehicle with gas? My Blink reaction the US’ war on Iran will likely be the straw that breaks the back of the camel known as strong domestic beef demand. To track this, we can monitor monthly Cold Storage reports, the February 28 numbers set for release on Tuesday, March 24. However, there are other market signals indicating a shift is already under way. 

Soybean Meal Rallying: Much of the chatter in the US oilseed sub-sector (of the larger Grains sector) the past couple years has been increased domestic crush demand to meet new renewable fuel obligations will offset export demand lost to the ongoing trade war between the US and China. Anyone with an I.Q. of more than 13 knows this isn’t true, but it is what it is. Headlines have chirped about how great things will be, according to not necessarily the Truth Social media posts, with the latest being the release of Renewable Volume Obligations (RVOs) for 2026 and 2027 was imminent, then pushed back, now the release date in doubt for the foreseeable future. Nevertheless, the idea of increased demand for US soybean oil (ZLK26) has helped that market rally over the past year, raising the question of what to do with all the byproduct – soybean meal – that will be on hand. But a funny thing has happened in the bean meal market (ZMK26). After working lower through mid-January 2026, the market has started rallying. Not only that, but the market’s futures spreads have gone through what I like to call a Chili Pepper Progression, moving from green numbers (a carry) to red numbers (an inverse) through at least the October 2026 futures contract at last Friday’s close. So why are bean meal futures spreads indicating a bullish fundamental situation when supplies are expected to grow? The most logical answer is an even larger increase in demand. Where does this demand come from? Feed, most notably broiler chickens, indicating US consumer demand for protein could be turning away from high priced beef and toward lower priced poultry. 

Food Security: One subject my friend Myra Saefong of MarketWatch kept coming back to was food security. Was the US war on Iran going to create a situation where food supplies tightened to uncomfortable levels? My answer was, and for now remains, no. The US will continue to produce ample supplies of grains, oilseeds, and protein. Brazil will do the same, adding in other staples of sugar, coffee, and orange juice (to go along with all the other commodities the South American giant produces). But global supplies are more vulnerable to Mother Nature’s temperament now. The US war on Iran has changed the dynamics, as I’ve talked about at length to this point, raising the prices nearly across the board with more expected over the coming years. If weather becomes adverse across key growing areas, those prices will go even higher. But the world will not run out of food. Probably. My friend Michele, a grain trader from Italy, sent me a question asking why the reaction by the Grains sector was more muted in relation to the rally in Energies in 2026 versus what was seen in 2022. When Russia launched its illegal war on Ukraine, aka the Breadbasket of Europe, the fear was global grain supplies would be diminished while energy supplies would be reshuffled due to US-led sanctions. This time around, the main concern is over the supply of fuel while global grain production won’t likely see much of a ripple effect, outside of what has already been talked about. Theoretically, this should put an even brighter spotlight on weather around the world, though algorithms continue to be triggered by headlines and social media posts instead. 

At face value, the game of connect the dots is more difficult, but not impossible. The same could be said for making market decisions in these extremely volatile times. If we take a step back and look at the situation, it’s actually easier to make decisions now because we don’t want to be traders in this environment.