Good morning!
Grain futures prices mixed-weaker overnight… As of 6:00 a.m. CDT, July corn was down 2 1/4 cents. July soybeans were down 14 1/2 cents. July soybean meal was down $3.10. July bean oil was 16 points lower. July SRW wheat was up 3 1/4 cents and hit a for-the-move high. July HRW was 2 cents lower. So far the grain markets bulls have not been impressed with news coming out of the Trump-Xi summit in China. (See item below.) On tap today is the weekly USDA export sales report. The key outside markets today see the U.S. dollar index near steady, while Nymex WTI crude oil prices are slightly up and trading around $101.50 a barrel. The yield on the benchmark 10-year U.S. Treasury yield is presently 4.46%.
Latest on U.S.-Iran war…
-- U.S. bid to end Iran war stumble as ship seized near United Arab Emirates
--Two India-bound LPG tankers add to uptick in Hormuz transits
-- Hormuz oil flows fell nearly 30% last quarter, EIA says
U.S. efforts to end the war with Iran were dealt a setback after a commercial vessel was apparently seized by unauthorized personnel near the United Arab Emirates, increasing uncertainty over control of the critical Strait of Hormuz, Bloomberg reported. “The ship, whose identity wasn’t immediately clear, was taken 38 nautical miles off the UAE coast and is now bound for the Islamic Republic, the U.K. Maritime Trade Operations said in a statement on Thursday.” The incident came amid an apparent uptick in vessels transiting the strait, which usually handles about a fifth of the world’s oil and liquefied natural gas supply. U.S. Secretary of State Marco Rubio urged China to persuade Iran to help reopen Hormuz, saying a protracted closure threatens the economies of countries that Beijing relies on for exports.
High winds in the Plains states today… The National Weather Service said high winds will buffet the Plains states today, with red flag warnings over much of the region. Meantime, a front over the northern Rockies/northern High Plains will advance eastward to the upper Great Lakes, then southwestward to the central/southern Plains by Saturday. The western end of the front will trigger showers and severe thunderstorms over parts of the central Plains today. There is a slight risk (level 2/5) of severe thunderstorms over parts of the central Plains through Friday morning. The hazards associated with these thunderstorms are frequent lightning, severe thunderstorm wind gusts, hail, and a threat of tornadoes. On Friday, as a front moves across the central Plain/middle Mississippi Valley, showers and severe thunderstorms will develop over parts of the region.
Trump-Xi meeting highlights… Here’s a catch-up on the latest developments regarding the meeting in Beijing between Presidents Trump and Xiand as reported by Bloomberg: The Xi-Trump meeting lasted more than two hours, with both sides talking up a vision for more stable ties. Statements from China focused on the Taiwan issue, with Xi reiterating the U.S. must handle the issue with “extreme caution.” Meanwhile, the U.S. readout from the meeting said both sides agreed the Strait of Hormuz must remain open. The next public event for the two leaders will be the state banquet. Premier Li Qiang also met with U.S. executives, saying the two countries can and should continue to be friends and partners. China renewed import licenses for hundreds of U.S. beef plants, according to people with direct knowledge of the matter. It’s an early positive signal on what more could come out of the summit. Markets are cautious. Chinese and Hong Kong stocks closed at their session lows. A White House official said Trump highlighted the need for China to boost purchases of American farm products. ”Soybean futures haven’t budged much since the headline on Trump and Xi discussing agricultural trade. Prices in Chicago are holding slightly lower. Bean traders are likely grasping for more concrete details. They wanted to see bigger, more formalized purchase commitments,” said Bloomberg. In an interview with CNBC this morning, U.S. Treasury Secretary Scott Bessent urged China to buy more U.S. soybeans than they have already committed to buy, because of the El Nino weather pattern that he said could cut soybean production. The U.S. also said China wants to buy more American crude oil to cut its Middle East oil reliance.
U.S. House passes measure to allow year-round E15 gasoline… It appeared nip and tuck for a while Wednesday, but the House of Representatives passed legislation that allows year-round sales of E15 gasoline blended with 15% ethanol, in a 218-203 vote. Corn growers and biofuel groups are elated. The American Soybean Association, however, has some reservations about the bill. Following passage, the ASA in a statement said that while it supports year-round access to E15, “the legislation passed today contains more than just E15 provisions.” The group cited a study by the Food and Agricultural Policy Research Institute and Congressional Budget Office analyses. The findings show the House version of the bill would result in “reduced net farm income and negative economic impacts for soybean growers and the broader agricultural economy,” the ASA said. The National Corn Growers Association hailed House passage of the bill and urged the Senate to quickly take action.
Warsh confirmed as Fed chair… Over in the Senate, Kevin Warsh won confirmation to become the next chair of the Federal Reserve when Jerome Powell’s term at the helm comes to an end this month. The 55-45 vote was the slimmest margin in the history of Fed chair confirmation votes, according to Bloomberg. Warsh will be presiding over a Fed wrestling with a significant pickup in inflation resulting from the oil supply shock created by the war with Iran. That’s served to squelch market expectations that Warsh will lead the central bank on the sort of aggressive rate-cutting plan President Trump has repeatedly insisted upon.
India bans sugar exports for four months… India, the world’s second-largest sugar producer, has banned exports for more than four months, according to an official notice and as reported by Bloomberg, as the government seeks to protect local supplies. “The move follows a cut in output estimates from a major millers’ group. India’s gross sugar production is forecast at 32 million tons in the season ending Sept. 30, down from an earlier projection of 32.4 million tons, the Indian Sugar & Bio-Energy Manufacturers Association said last month,” said the report. The country’s next harvest, which starts around October, could be also affected by a lower-than-average monsoon. The annual rains that start next month are expected to be curbed by the looming El Niño weather pattern. The country is also a major fertilizer importer and is grappling with a spike in global prices driven by the war in Iran.
Inflation hitting India hard... India’s producer prices surged to just over a three-and-a-half-year high in April as elevated energy prices pushed up manufacturers’ input costs. The wholesale price index rose 8.30% from a year earlier, up from 3.88% in March and above the 5.50% median estimate in a Bloomberg survey of economists, data released Thursday by the Ministry of Commerce and Industry showed. Fuel and power led the increase, with inflation in the category jumping 24.71% in April from 1.05% a month earlier. In February, before the U.S. conflict with Iran, prices in the category had fallen 3.85%. Primary articles, which include raw materials and agricultural products, rose 9.17%, compared with 6.36% in March.
Malaysian palm oil futures continue to slump… Malaysian palm oil futures traded below MYR 4,450 per MT, extending losses that began in early May and notching their lowest level in a month. A stronger ringgit weighed on sentiment, alongside weakness in rival edible oils traded on the Dalian and Chicago exchanges. So far this week, contracts have declined around 2.2%, dragged by softer demand in the key buyer India. According to the Mumbai-based Solvent Extractors’ Association of India, the country’s palm oil imports plunged 26% in April from the prior month to the lowest level in four months, as weak institutional demand and a recent price rally narrowed palm oil’s discount against competing oils, discouraging refiners from increasing purchases. Meanwhile, export signals for May were mixed: AmSpec Agri noted shipments down 10.8%, while Intertek reported an 8.5% rise. Traders now keep an eye on a Beijing summit between U.S. President Trump and China’s Xi Jinping, with agricultural trade expected to stay in focus.
Cattle futures post solid mid-week gains… June live cattle on Wednesday rose $5.10 to $252.80. August feeder cattle rose $4.375 to $360.925 and hit a six-week low early on. The cattle futures markets saw good corrective buying following recent losses. The high-range closes Wednesday suggest the bears may now be exhausted. Modestly higher cash cattle prices fetched in active trading at mid-week were also bullish for futures. USDA at midday Wednesday reported good cash trading activity so far this week, with steers fetching an average price of $259.92 and heifers $259.53. Last week’s average cash cattle trade was $258.52, up $3.50 from the week prior. Hot temperatures in the southern Plains through this weekend will stress livestock.
Short-covering bounce in lean hog futures… June lean hog futures on Wednesday rose $2.45 to $100.875. The lean hog futures market saw short covering and perceived bargain hunting after hitting a multi-month low on Tuesday. Good follow-through buying today would begin to suggest a near-term market bottom is in place. The near-term technical posture for June hogs is still bearish as prices are still in a downtrend on the daily bar chart. The latest CME lean hog index is up 7 cents at $90.48. Today’s projected cash index price is up 26 cents at $90.74. The national direct five-day rolling average cash hog price quote Wednesday was $95.04.