Good morning!
Grain futures mixed-firmer overnight… At 6:00 a.m. CDT, July corn was up 1 1/2 cents. July soybeans were up 7 cents. July soybean meal was up $3.40. July bean oil was 14 points down. July SRW wheat was up 7 cents and July HRW was 6 1/2 cents higher. While present Corn Belt weather conditions and extended forecasts still lean bearish for corn and soybeans into early July, the bulls are thinking those conditions have factored into futures prices, given price action so far this week. Closes in grain prices on Thursday (markets are closed Friday) at or near their weekly highs would be better clues the grain markets have put in near-term price bottoms. The Malaysian palm oil futures market was closed today for a holiday. The key outside markets today see the U.S. dollar index slightly higher, while Nymex WTI crude oil prices are near steady, hit a three-month low overnight and are trading around $76.00 a barrel. The yield on the benchmark 10-year U.S. Treasury yield is presently 4.43%.
Iran to get major financial relief under interim deal with U.S. … Iran would be allowed to start oil exports immediately under an interim deal with the U.S. and gain access to a $300 billion economic development program, according to a Bloomberg report. “The U.S. Treasury Department will issue waivers for exports of Iranian crude oil and petrochemical products immediately after the memorandum is signed, and the U.S. will end its naval blockade of Iranian ports. The U.S. and its regional partners would create a plan to rehabilitate Iran and allow for its economic development, with financing of at least $300 billion, according to the draft document.” The two sides plan to formally sign the memorandum of understanding on Friday in Switzerland, formalizing an agreement reached earlier and clearing the way for 60 days of talks to end the war and put strict limits on Iran’s nuclear program. Another person familiar with its contents, who asked not to be identified discussing private deliberations, said technical details were still being worked out, suggesting precise language may still change before the signing, said Bloomberg.
Nymex WTI crude falls to 3-month low below $75 a barrel… Nymex West Texas Intermediate crude oil futures prices briefly touched a fresh three-month low of $74.59, before paring its losses, with prices under heavy pressure from the looming U.S.-Iran peace deal that threatens to add a gush of barrels back to the market. “Shipowners are gearing up for the reopening by repositioning vessels toward the Middle East. Any eventual resumption could also lead to the release of more than 100 laden ships with oil from Middle East countries other than Iran that are stuck inside the Gulf, effectively acting as a stockpile release on the market,” said a Bloomberg report. “The prospect of a gush of supply is showing up in major market gauges. Key timespreads in the Middle Eastern Dubai market have already plunged into the bearish contango structure that signals oversupply. Brent’s nearest timespread was on a similar path on Wednesday. The International Energy Agency warned on Wednesday that the conflict is causing a bigger hit to demand than previously thought, saying in its first look at next year’s balances that it expects a renewed glut.”
Renewable fuels key to recovery in U.S. agriculture sector: S&P Global… The U.S. agricultural sector needs to “explore new pathways to reignite growth in farm communities, drive innovation and expand agriculture’s capacity to feed and fuel the world using fewer resources,” said a compelling report released by S&P Global. “Under a scenario where biofuel demand expands, U.S. agricultural production remains strong and continues to serve as a secure, ample, and reliable long-term supplier of corn, ethanol, and other agricultural products to domestic and international markets,” said S&P Global. Biofuels stand out as a uniquely powerful catalyst with the potential to restore long-term profitability to American farms and drive investment in rural communities, as well as unlock demand for sustainable feedstocks, creating a market that rewards farmers for pioneering modern farm practices. The report said that under an “optimized scenario,” global biofuel output would triple or more by 2050.
New World screwworm cases detected in U.S. still at 12… The USDA Animal and Plant Health and Inspection Service (APHIS) on its NWS website is still reporting 12 total New World screwworm detected cases, in Texas and New Mexico.
Severe storms possible in central U.S. today … The National Weather Service today said a severe weather outbreak is in store today for portions of the Midwest, mid-Mississippi and Ohio Valleys, particularly across parts of central Illinois and northwestern Indiana. Some thunderstorms are likely to be severe, carrying a risk of large hail, damaging winds and potentially intense tornadoes. Consequently, there is also a slight risk of excessive rainfall for much of the Midwest and lower Great Lakes, with a moderate risk south of Lake Michigan. Meantime, the West will generally be quiet through the next couple of days, with highs reaching 100 in the Great Basin, 110s in the Desert Southwest. Triple digit temperatures are also forecast for the central to southern High Plains before the arrival of a cold front from the north by Thursday.
Fed’s FOMC meeting ends today; likely no change in rates… This afternoon’s conclusion of the meeting of the Federal Reserve’s Open Market Committee (FOMC)--the first for new Chairman Kevin Warsh--see Fed watchers expecting Warsh to not make any waves in his first FOMC meeting. The U.S. central bank is expected to leave U.S. monetary policy unchanged today, with an FOMC statement and a following press conference from Warsh. Markets will be watching for changes in Fed communications under Warsh. Bloomberg Economics expects the new chair to forgo submitting his own interest-rate projection to the closely watched dot plot, a break from the practice followed by Jerome Powell, Janet Yellen and Ben Bernanke. “Warsh faces a formidable challenge, striking a balance between President Trump’s desire for lower rates and signaling to the market that he is a credible and independent Fed chair,” said Bank J Safra Sarasin equity strategist Wolf von Rotberg, according to Bloomberg. “Inflationary pressures in the U.S. are unlikely to abate quickly. Solid growth and elevated core inflation suggest a hawkish bias, regardless of oil prices.”
Rush of grain demand from Asia possible after Hormuz opens… Bloomberg says a reopened Strait of Hormuz may see a rush of grain demand from Asian countries. The report noted that the Gulf is among the world’s most import-dependent food markets, relying on overseas supplies for around 90% of its food consumption. Iran ranks among the world’s largest soybean and soybean meal buyers is also a major importer of Brazilian corn. Many of the region’s main grain import hubs, including Jebel Ali in the United Arab Emirates, Dammam in Saudi Arabia and Iran’s Bandar Imam Khomeini, lie behind the strait. In May, overall grain imports to the region fell to 942,000 tons, down more than 50% from a year ago, the report said, citing Kpler data, highlighting the extent to which alternative routes have failed to replace pre-war flows through the Strait of Hormuz.
Open Strait of Hormuz not enough to prevent further ECB rate hikes… European Central Bank officials are signaling that a U.S.-Iran peace accord won’t necessarily stop them from raising interest rates further, even if it prevents a more pronounced overshoot in inflation, according to a Bloomberg report. While policymakers including President Christine Lagarde welcome the prospect of oil shipments resuming through the Strait of Hormuz, they say significant economic havoc has already been inflicted and have no regrets about last week’s decision to hike. “Higher energy costs are likely to remain with us longer than many had hoped,” Governing Council member Peter Kazimir said. “Even with the just-announced U.S.-Iran peace framework, the damage in the Middle East cannot be undone overnight.” The main concern is that it will take time to restore production capacity, repair infrastructure and get ships sailing again. Meanwhile, efforts to rebuild inventories will keep crude prices elevated, said the report.
Cattle futures bulls have the pedal to the metal… August live cattle on Tuesday rose $5.95 to $249.20 and hit a four-week high. August feeders gained $5.325 to $366.875 and hit a five-week high. The cattle futures markets saw a strong session of price gains, making it four out of the past five with higher daily closes. At present, the New World screwworm situation is leaning fully bullish for cattle futures. The USDA Animal and Plant Health and Inspection Service (APHIS) on its NWS website is still reporting 12 total New World screwworm detected cases, in Texas and New Mexico. The technical postures for live and feeder cattle futures have also markedly improved the past week, which is inviting the chart-based specs back to the long sides. USDA at midday Tuesday reported very light cash cattle trading so far this week has $354.00. The agency said cash trade last week averaged $256.08, down 45 cents from the week prior.
Lean hog futures bears remain in firm control… August lean hog futures on Tuesday fell $0.725 to $95.05. The lean hog futures market saw more chart-based selling as the near-term technicals remain firmly bearish amid a price downtrend in place on the daily bar chart. The market is still somewhat short-term oversold, technically, and due for a corrective bounce soon. Lean hog bulls are disappointed the hog futures have not gained any traction amid the solid rallies in cattle futures markets the past few sessions. The latest CME lean hog index is down 66 cents at $92.09. Today’s projected cash index price is down 16 cents $91.93. The national direct five-day rolling average cash hog price quote Tuesday was $96.32.