Good morning!
Grain futures mostly weaker overnight… Corn and soybean futures prices were lower in overnight trading, with corn leading the way, on follow-through selling pressure from Monday’s losses. Winter wheat futures were narrowly mixed. The grain market bulls are fading and need to step up and show fresh power soon in order to keep the chart-based speculators from pushing the short sides again. The key outside markets today see the U.S. dollar index near steady, with Nymex crude oil prices weaker and trading around $66.75 a barrel. The yield on the benchmark 10-year U.S. Treasury note is presently 4.392%.
Corn crop condition unchanged... USDA Monday afternoon rated the U.S. corn crop in 74% good” to excellent condition as of Sunday, unchanged from the previous week. The poor to very poor rating rose 1 point on the week to 6%. USDA rated the soybean crop as 68% good to excellent, down 2 percentage points from last week. The poor to very poor rating gained 2 points to 7%. The agency rated the U.S. spring wheat crop as 52% good to excellent, down 2 points from last week. The poor to very poor rating gained 3 points to 16%. U.S. winter wheat harvest advanced 10 points to 73% complete, one point ahead of the five-year average. USDA rated the U.S. cotton crop as 57% good to excellent, up three points from last week. The poor to very poor rating fell 4 points to 13%.
Malaysian palm oil futures up modestly… The palm oil market overnight saw a modest rebound from a sharp 2% sell off Monday. The Malaysian Palm Oil Council (MPOC) expects prices to stay firm in August, supported by festive demand from India, the world’s largest palm oil consumer, and elevated U.S. soybean oil futures prices.
U.S. seeks to plug China trade loopholes… President Trump’s efforts to target China through its trading partners across global supply chains threatens to erode China’s economic growth and most of its exports to the U.S., according to Bloomberg Economics. “China has increasingly relied on third countries for the manufacturing of final products or components, a trend that accelerated following Trump’s first trade war and his imposition of higher restrictions on the world’s second-largest economy.” China’s share of total value-added manufacturing of goods destined for the U.S through other countries rose to 22% in 2023 from 14% in 2017. If the U.S. is successful in targeting shipments via higher levies or supply chain requirements, it would threaten 70% of China’s exports to the U.S. and more than 2.1% of China’s gross domestic product, according to the Bloomberg report.
Thailand near a trade deal with U.S… Thailand is close to a trade agreement with the U.S. to lower a threatened 36% U.S. tariff on its exports ahead of the Aug. 1 U.S. trade-deal deadline, Bloomberg reports. Thailand’s finance minister expects trade talks to conclude within days.
Japan, U.S. officials meeting on trade… Japan’s chief trade negotiator met with U.S. Commerce Secretary Howard Lutnick in Washington late Monday. Bloomberg said the two “had frank, in-depth discussions toward achieving a mutually beneficial agreement.”
Greenback may be losing upside momentum… The U.S. dollar index last week hit a three-week high and prices have rebounded well off the early-July low. However, Bloomberg reports currency options markets are signaling the U.S. dollar will come under renewed pressure heading into August. One-month risk reversals in the Bloomberg Dollar Spot Index have shifted into negative territory, favoring protection against dollar weakness. Peter Kinsella, head of foreign-currency strategy at Union Bancaire Privee Ubp SA, told Bloomberg “we could see a weaker dollar” and that the dollar “probably hasn’t bottomed out yet.”
Fed Chair Powell speaks today… Traders and investors are awaiting a speech by Federal Reserve Chairman Jerome Powell later today amid mounting pressure on Powell from the Trump administration to resign.
Cattle futures at record highs…Live and feeder cattle futures markets on Monday hit record highs. Live cattle futures’ still-steep discounts to the cash cattle market continue invite speculators to the long sides of the markets. USDA reported the average cash cattle trading price for last week was $237.78, up 57 cents from the week prior’s average. We look for near-steady cash cattle prices this week as packers have been reluctant to bid up for cattle supplies given cutting margins that are presently in the red.
Hog futures seeing spillover buying from cattle market rallies… The lean hog futures market is being supported in part by cattle futures markets’ prices that set record highs Monday. Lean hog futures discounts to the cash hog index are also limiting selling interest in futures. The latest CME lean hog index is up 30 cents to $107.93 as of July 17. Tuesday’s projected cash index price is up 27 cents at $108.20.
Today’s reports--Tuesday
1:00 p.m. Fruit and Tree Nuts Data — ERS
1:00 p.m. Vegetables and Pulses Data — ERS
2:00 p.m. Milk Production — NASS