Good morning!
Grain futures weaker overnight… As of 6:00 a.m. CST, March corn was down 2 cents. March soybeans were 5 1/4 cents lower. March SRW and HRW wheat futures were down 1 3/4 to 3 1/4 cents. Corn, soybeans and meal futures have pulled back from Friday’s multi-week highs, while the winter wheat futures markets are languishing and struggling to restart price uptrends on the daily bar charts. Soybean oil futures hit a six-month high overnight on hopes for better demand for U.S. bean oil from India (see item below). On tap today for the grains is the weekly USDA export inspections report. Tuesday brings the monthly USDA supply and demand report. The key outside markets today see the U.S. dollar index lower, with crude oil near steady and trading around $63.50 a barrel. The yield on the benchmark 10-year U.S. Treasury note is presently 4.2%.
Warmer in the Midwest, Plains early this week… The National Weather Service today reported warmer-than-average temperatures are forecast to continue early this week for the central U.S. as well as into portions of the western U.S. The focus Monday remains on the central Plains, where highs into the 60s and 70s are upwards of 35-40 degrees above early February averages. Some daily record-tying/breaking highs will be possible. Meantime, a cold front has brought a relative cool down to the northern Plains, though highs will remain above average, reaching into the 40s and low 50s. This cold front will continue southward on Tuesday bringing a similar relative cool down to the central Plains, with highs into the 50s still above average. Much of the southern tier remains above average as well, with highs in the 70s and 80s from the southern Plains west through the Southwest and to southern California. The combination of above average temperatures as well as gusty winds and very low humidity has prompted a critical risk of fire weather for portions of the central and southern High Plains. Meanwhile, a moderating trend is expected through mid-week for the eastern U.S. following a period of much colder weather, and a particularly brutal weekend for the Northeast/Mid-Atlantic.
Busy U.S. economic data week… The January U.S. jobs report on Wednesday and the consumer price index, due Friday, are unusually close together on the calendar after the partial federal government shutdown delayed each by a few days. “The employment report will be even more substantive than usual. In addition to the monthly payrolls and unemployment numbers, each January release includes an annual revision to the jobs count. The so-called benchmark update is expected to reveal a notable markdown to payrolls growth in the year through March 2025,” Bloomberg reported. As for the regular monthly figures, economists predict payrolls rose 69,000 in January. The unemployment rate is seen holding at 4.4%, near a four-year high. In the CPI data, economists will look for more evidence that inflation is on a downward trend after previous reports were complicated by last year’s record-long government shutdown. Forecasters expect an underlying metric of inflation — which excludes food and energy costs — to rise at the slowest annual pace since early 2021. Government figures on Tuesday are projected to show another month of solid retail sales in December. The monthly USDA supply and demand report is also out at midday Tuesday. National Association of Realtors data due on Thursday will probably show sales of previously owned homes declined in January, said Bloomberg.
China advises its domestic financial institutions to reduce U.S. Treasury holdings… Chinese regulators have advised financial institutions to rein in their holdings of U.S. Treasuries, citing concerns over concentration risks and market volatility, Bloomberg reported today. Officials urged banks to limit purchases of U.S. government bonds and instructed those with high exposure to pare down their positions, but the directive doesn’t apply to China’s state holdings of U.S. Treasuries. “The move was framed around diversifying market risk rather than anything to do with geopolitical maneuvering or a fundamental loss of confidence in U.S. creditworthiness,” said the report. U.S. Treasury futures prices were modestly down overnight, following the China news.
Japanese ruling Liberal Democrats see landslide win in lower house election… Japanese Prime Minister Sanae Takaichi hailed the strong mandate she won in her election landslide over the weekend and vowed to build trust with financial markets as concerns grow over how she’ll pay for a planned tax cut. Speaking Monday in her first press briefing since leading the ruling Liberal Democratic Party to its most dominant election win in Japan’s post-war history, Takaichi acknowledged concerns among investors over the plan to cut the sales tax on food items for two years. She reiterated plans to avoid issuing bonds to fund the measure while vowing to look for other revenue streams or savings, including revision of subsidies and tax exemptions. She didn’t provide further details, Bloomberg reported. “Markets on Monday provided at least a temporary reprieve from ructions that have threatened to undermine Takaichi’s spending plans. Japanese equities surged to fresh record highs, while the yen and government bonds stayed noticeably calmer than many had feared following weeks of volatility fueled by concerns about fiscal sustainability,” said the report. Takaichi’s election victory is handing Chinese leader Xi Jinping a dilemma: Engage with Japan’s most popular post-war leader or continue a deep freeze with the U.S.’s top ally in Asia, added Bloomberg.
Soybean oil futures rally to six-month high as India may buy more U.S. bean oil… March soybean oil futures prices rose to the highest level in more than six months, driven by hopes that India will buy more U.S. bean oil after proposing to open parts of its agriculture market to cheaper U.S. imports. India late Friday said it agreed to cut or eliminate import duties on U.S. agricultural products, including soybean oil, according to a joint statement on the framework for an interim trade deal. The trade deal with the U.S. could allow American supplies to gain market share from other major exporters and curb demand for competing edible oils.
Bessent: Start Warsh Fed chair Senate hearings… U.S. Treasury Secretary Scott Bessent on Sunday suggested the U.S. Senate start hearings on President Trump’s pick to lead the Federal Reserve despite a vow from a key Republican to block all such nominations from advancing until a criminal investigation targeting current chair Jerome Powell is resolved. Senator Thom Tillis, a North Carolina Republican and member of the Banking Committee that holds hearings for nominees to the central bank, has said he will block all of Trump’s Fed nominations until the Department of Justice probe into Powell’s statements to Congress last year about renovations at the Fed’s headquarters are completed. “Senator Tillis has come out and said he thinks that Kevin Warsh is a very strong candidate,” Bessent said on Fox News’ Sunday Morning Futures and as reported by Bloomberg. “So I would say: Why don’t we get the hearings under way and see where Jeanine Pirro’s investigation goes,” Bessent said. Pirro, the U.S. attorney for the District of Columbia, is leading the probe against Powell and has issued subpoenas for the case.
Iran says some progress made in nuclear talks with U.S. … Iran’s President Masoud Pezeshkian over the weekend described the Friday nuclear talks with the U.S. as “a step forward,” even as he pushed back against any attempts at intimidation. “Dialogue has always been our strategy for resolving issues peacefully,” Pezeshkian said in an X posting on Sunday and as reported by Bloomberg, referring to the talks that featured Iranian Foreign Minister Abbas Araghchi, U.S. special envoy Steve Witkoff and President Trump’s son-in-law, Jared Kushner. Trump characterized Friday’s talks as “very good” and said another meeting was set for early this week. The renewed engagement comes under the shadow of a continued U.S. military buildup in the Middle East and fresh American sanctions targeting Iran’s oil shipments. Trump has threatened strikes on Iran, citing both Tehran’s crackdown on protests as well as its nuclear and ballistic missile programs.
China to blame for speculative blow-off in gold prices: Bessent… U.S. Treasury Secretary Bessent cited Chinese traders as a reason behind recent wild swings in the gold market. “The gold move thing — things have gotten a little unruly in China,” Bessent said on Fox News’ Sunday Morning Futures and as reported by Bloomberg. “They’re having to tighten margin requirements. So gold looks to me kind of like a classical, speculative blow-off.” Bessent was responding to a question about a record-breaking rally in precious metals — fueled by speculative buying, geopolitical turmoil and concern about the Federal Reserve’s independence—that abruptly ended in late January. Meantime, the CFTC reported money managers slashed their bullish wagers on gold futures to the lowest since October as the precious metal recently suffered its biggest price plunge in more than a decade. Hedge funds and other large speculators reduced net-long positions by 23% to 93,438 contracts for the week ended Feb. 3. The level was the lowest in 15 weeks, CFTC data showed Friday.
JBS buys 80% stake in Oman meat plants… JBS NV, the world’s largest meat producer, agreed to buy a controlling stake in an Oman food business through a deal with wealth fund Oman Investment Authority, according to a Bloomberg report. “The Sao Paulo-based meatpacker is investing $150 million to obtain an 80% stake of the business, which includes a poultry plant and a unit that processes beef and lamb. The Oman wealth fund will retain the remaining 20% stake. The deal will allow JBS to produce fresh meat locally, sourcing breeder chickens from local suppliers in Oman. The lamb and beef meat unit will receive animals from other countries in Africa and the Middle East,” said the report. The deal marks JBS’ newest effort in the halal market involving food that adheres to Islamic law. JBS already processes chicken in Saudi Arabia and recently announced the expansion of its unit in Jeddah.
Malaysian palm oil futures prices gain… Malaysian palm oil futures rose modestly on Monday, hovering above MYR 4,170 per MT and snapping two sessions of steep losses, as gains in rival soyoil on the Chicago and Dalian exchanges lent support ahead of monthly data from the Malaysian Palm Oil Board due Tuesday. Sentiment was further buoyed by stronger export figures, with cargo surveyors noting January shipments rose 14.9%–17.9% mom, supported by restocking ahead of the Spring Festival and Ramadan. Demand from the top buyer, India, also improved, as January imports jumped 51% to a four-month high after falling in December. At the same time, Reuters estimated Malaysia’s palm oil inventories likely ended a 10-month growth in January, as robust exports coincided with a seasonal slowdown in output. However, gains were capped by a firmer ringgit and weakness in crude oil prices amid easing concerns over supply disruptions. Caution also lingered ahead of CPI and PPI data from China, a major consumer, later this week.
Cattle futures markets rebound Friday… April live cattle futures on Friday rose $1.65 to $237.25 and for the week rose 45 cents. March feeder cattle futures gained $3.35 to $367.425 and for the week were up $7.15. The live and feeder cattle futures markets on Friday came out of the chute strong early but faded down the stretch. The near-term technical postures for the cattle futures markets weakened a bit late last week, which kept some of the chart-based bulls on the sidelines. Cash cattle trading activity picked up late last week, with USDA Friday reporting steers averaging $239.91 and heifers averaging $239.85. USDA reported average cash cattle trading the week prior was $239.44.
Lean hog futures see modest profit taking… April lean hogs on Friday fell 42 1/2 cents to $97.95 and for the week were up $2.80. The futures market late last week paused and saw some mild profit taking after April futures hit a contract high last Wednesday. Still-bullish technicals and the recent rallies in the cash hog and CME lean hog index prices will likely keep hog futures prices elevated in the near term. Hog futures’ premium to the CME lean hog index also is a positive element for the futures market. The latest CME lean hog index is up 32 cents to $83.38. Today’s projected cash index price is up another 19 cents to $86.57. The national direct five-day rolling average cash hog price quote for Friday was $62.81.