Good morning!
Grain futures prices firmer overnight… As of 6:00 a.m. CST, July corn was up 1 1/4 cents and hit another four-week high. July soybeans were 4 cents higher. July soybean meal was up $1.50 and hit a two-week high. July bean oil was 57 points higher and hit a contract high. July SRW wheat was up 3 1/ 4 cents and July HRW was up 5 cents, with both hitting nearly two-year highs. The winter wheat futures markets are leading rallies in the grains, amid a deteriorating U.S. HRW crop. (See item below.) However, bulls need to beware that corn and winter wheat markets have moved into technically overbought territory and are now due for routine downside price corrections. The key outside markets today see the U.S. dollar index firmer, while Nymex WTI crude oil prices are solidly up and trading around $103.50 a barrel. The yield on the benchmark 10-year U.S. Treasury yield is presently 4.36%.
Latest on the war in the Middle East…
--U.S. signals no letup of naval blockade as it aims to squeeze Iran
--“Iran can’t get their act together,” says Trump in social media post today
--Nymex WTI crude oil futures prices back above $100 a barrel
--Trump on Tuesday said Iran wants Hormuz open amid efforts to end war
--U.S. warns of sanctions risks for Chinese refiners of Iranian oil
--California jet fuel woes deepen as Asia flows hit decade low
-- Bond traders ramp up wagers hedging for 5% 10-year U.S. Treasury yields as oil surges
--Japan confirms Hormuz transit as Iran talks continue, prime minister says
--European airports warn of tough outlook as war disrupts flights
Cooler temps coming to central, eastern U.S. … The National Weather Service today said there will be a swath of showers and thunderstorms from the Ohio Valley and Mid-Atlantic to south-central Texas today, ahead of a cold front. The threat of flash flooding and severe weather with this activity today will be lower compared to earlier this week. From Texas west into New Mexico there may be heavy downpours and flash flooding possible. Elsewhere, the northern/central Rockies and adjacent High Plains will see some scattered showers over the next couple of days, with snow possible for higher mountain elevations. The passing cold front will bring increasingly more widespread cooler, below-average temperatures to the central/eastern U.S. over the next few days.
“U.S. hard red wheat missing rain at the worst time:” World Weather Inc … The forecaster Tuesday afternoon issued a special report saying a system that brought rain and thunderstorms to portions of the U.S. Plains, Midwest, and Delta this past weekend brought some precipitation to portions of Kansas and Nebraska. “However, several of the main hard red winter wheat areas in the central and southern Plains missed out on meaningful precipitation, southern and western Kansas in particular. Drought is firmly in place across hard red wheat country and there is still a pressing need for more rain.” Rain is predicted for Texas and southern Oklahoma later this week, but much of Kansas and northern Oklahoma may be missed again. “Other opportunities for showers and thunderstorms will come and go during the following week to ten days, but the odds are not favoring a general soaking and that implies ongoing crop stress and a rising risk to production,” said World Weather. “The only good news is that there should not be any excessive heat during the next 10 days.”
Bloomberg ag price Index climbs to 2.5-year high… “The extended closure of the Strait of Hormuz and extreme weather have jolted the price index for farm commodities to a two-year high as fertilizer headaches and the prospect of smaller harvests drive food inflation risks,” said Bloomberg. The Bloomberg Agriculture Spot Index, which tracks 10 of the world’s top-selling crop products, has climbed for a third straight month to the highest level since November 2023. “That’s a pronounced shift from before the war, when most crop prices were weighed down by abundant inventory and bumper harvests. Now, farmers from Asia to Australia and the U.S. are grappling with converging challenges posed by the Iran war and drought, pressuring the prices of staple food products from bread to pasta and cooking oil. The war has changed that balance materially, primarily through energy, fertilizer, and logistics channels.”
Fed’s FOMC meeting ends this afternoon; policy likely to remain unchanged… The Federal Reserve’s Open Market Committee (FOMC) meeting that began Tuesday morning and ends this afternoon with a statement and press conference from Fed Chair Jerome Powell. No change in U.S. monetary policy is expected at this week’s meeting. This FOMC meeting will likely be the last for Powell as head of the U.S. central bank. The Fed is widely expected to keep the federal funds rate unchanged at the 3.5%–3.75% target range for a third consecutive meeting. “The outlook for the rest of the year remains uncertain, with oil prices continuing to rise and inflation picking up due to the energy shock, even as labor market and broader economic indicators remain resilient,” said TradingEconomics.com.
U.S. imports of used cooking oil on the rise amid increased biofuel blending… American imports of used cooking oil from China are set to accelerate as increased U.S. biofuel-blending requirements kick in and the Iran war drives up energy costs, making the feedstock a relative bargain, Bloomberg reports. “Two cargoes carrying a combined 339,000 barrels of so-called UCO arrived in the U.S. in the last month or so, according to Kpler data. The supplies represent the biggest imports this year, with about half of it delivered to Port Arthur, Texas, where Valero Energy Corp. partners with Darling Ingredients Inc. at the Diamond Green Diesel facility.” More imports are expected, with the Trump administration’s renewable fuels plan requiring a record amount of biofuels to be mixed into conventional diesel and gasoline supplies this year. “The stepped-up blending quotas are designed to boost demand and benefit American farmers and were unveiled in March as the U.S. and Israel’s attacks on Iran caused prices for oil and fertilizer to surge,” said Bloomberg.
UAE leaving OPEC significantly weakens the oil cartel… The United Arab Emirates’ decision to quit OPEC “has blindsided its partners and will dilute the cartel’s ability to manage oil prices by adjusting supply,” Bloomberg reported. “The UAE’s departure will position it as a wild-card player in the global oil market, and officials have signaled their intention to boost production once the oil starts flowing again. The departure of the UAE, one of OPEC’s most influential members, will raise wider questions about the group’s credibility and market power, which has already been eroded in recent years,” said the report. For more perspective, see our Evening Report from Tuesday.
China removes top government ag official… China has removed Han Jun, the most senior Communist Party official at the agriculture ministry, in a sudden move that marks the second such reshuffle in under two years, said a Bloomberg report. The Party Central Committee appointed Zhang Zhu as the new party chief, according to an official statement released late on Tuesday. The position paves the way for him to become agriculture minister: Han was appointed to the same party role in June 2024 and became minister a few months later. “Food security, always front of mind for Beijing, has become even more important in recent years, as China copes with the fallout from Russia’s invasion of Ukraine, Covid and trade tensions with top agriculture suppliers including the U.S.,” said the report. Han served less than two years in the role and his removal marks the third change in six years, unusually frequent turnover for a senior position. It adds to a flurry of reshuffles in the top echelons of the Communist Party over recent months.
World’s central banks still stockpiling gold… The globe’s central banks added gold to their stockpiles at the fastest pace in more than a year in the first quarter, the World Gold Council reported, as a slump in prices encouraged a wave of buying that more than offset sales by a handful of institutions. Net official-sector purchases totaled 244 tons in the three months, up from 208 tons in the previous quarter, according to estimates from the WGC, an industry body. Poland, Uzbekistan and China were the largest reported buyers, although some other purchases were undeclared. Gold prices backing down from record highs may have prompted the central banks to step in and buy the dip. “It’s the first time in a while that we’ve seen a decent correction in gold,” said John Reade, chief strategist at the London-based WGC. “That has allowed central banks that might have been hanging back, waiting for exactly this opportunity, to come in and scoop up a load.”
Malaysian palm oil futures prices remain under pressure… Malaysian palm oil futures eased again at mid-week, hovering near MYR 4,520 per MT amid weakness in Dalian palm olein and Chicago soyoil. Trading stayed muted as softer export prospects weighed on sentiment. Cargo surveyors reported April 1–25 shipments down 15.7%–16.8% from March, reflecting a typical post-festive slowdown. Buyers also held back on near-term purchases after the recent price run-up and amid ample inventories following strong February shipments, AmInvestment Bank noted. Still, losses were cushioned by a weaker ringgit, which boosts export competitiveness, and firmer crude oil after the U.S. reportedly may extend its blockade of Iranian ports. Looking ahead, the Malaysian Palm Oil Council expects prices to stay above MYR 4,500 in the near term, supported by elevated energy costs and potential El Niño risks. Market participants now await China’s upcoming PMI data for clearer signals on demand conditions in key importing markets.
Resilient cattle futures markets continue to humble the bears… June live cattle on Tuesday rose $4.55 to $253.50 and hit a contract and record high. May feeder cattle gained $4.275 to $371.725. The cattle futures markets saw a second straight session of very strong gains that put the bulls back in firm technical control. Tuesday’s big gains were especially impressive given the keener risk aversion in the general marketplace Tuesday, as seen by lower stock index prices. USDA at midday Tuesday reported no cash cattle trading yet this week. Last week’s cash cattle price fetched an average price of $246.18, which is down $1.86 from the prior week’s average trade of $248.02.
Lean hog futures see mild short covering, chart consolidation… June lean hog futures on Tuesday fell $0.225 to $101.975. The hog futures market saw mild short covering and perceived bargain hunting early in the session but gave up those mild gains to end the day. Strong gains in the cattle futures markets again Tuesday limited selling interest in hog futures. The latest CME lean hog index is down 18 cents at $91.26. Today’s projected cash index price is down another 7 cents at $91.18. The national direct five-day rolling average cash hog price quote Tuesday was $90.73.