Good morning!
Grain futures lower overnight… At 6:00 a.m. CDT, July corn was down 2 cents. July soybeans were down 9 cents. July soybean meal was off $0.30. July bean oil was 48 points down. July SRW wheat was steady. July HRW was 7 3/4 cents lower. The grain market bulls can’t seem to get out of their rut of taking one step forward and two steps back, as there was no follow-through price strength overnight after Monday’s gains. Generally good growing weather for U.S. corn and soybeans, as well as this week’s sell off in crude oil prices, are presently anchors on grain prices. One early clue that the grain futures markets have put in near-term price bottoms would be two days in a row of decent price gains. It’s been at least a month since such has occurred in the corn, bean and winter wheat markets. The key outside markets today see the U.S. dollar index slightly lower, while Nymex WTI crude oil prices are lower, hit a two-month low and are trading around $78.50 a barrel. The yield on the benchmark 10-year U.S. Treasury yield is presently 4.44%.
Latest on U.S.-Iran peace prospects…
- U.S. at odds with allies over how easy it is to reopen Hormuz
- Two Iran-linked tankers sail through Hormuz before deal signing
The White House sought to make the case that its interim deal with Iran will end a global energy crisis and achieve the administration’s wartime goals. World leaders at the G7 meeting in France welcomed the agreement and markets responded positively. However, doubts remained on when it will go into effect — or how exactly it will lead to the reopening of the Strait of Hormuz. The U.S. and Iran have yet to release a text of the memorandum of understanding, and the two sides have diverged on what the agreement will look like, including the potential for tolls on traffic through the strait.
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.
Mostly pleasant temps but potential storms in Midwest, Northern Plains… The National Weather Service today said a weather pattern favoring cold air from Canada is bringing a cool and dry airmass into much of the eastern two-thirds of the country. This weather pattern will also send a couple of quick-moving low-pressure systems across the northern tier states, bringing showers and embedded thunderstorms with gusty winds through the next couple of days.The first system will move across the Great Lakes today and tonight.The second system is forecast to be the stronger of the two and will rapidly intensify over the Northern Plains Wednesday morning.An outbreak of severe weather is forecast to emerge across Iowa to Illinois Wednesday morning ahead of a warm front. Additional severe thunderstorms are forecast to erupt through Wednesday night across the remainder of the Midwest, the lower Great Lakes and toward the Ohio Valley as the low-pressure system intensifies further and forces its way eastward.The Storm Prediction Center has highlighted an enhanced to moderate risk of severe thunderstorms across the Midwest on Wednesday. Meantime, a prolonged heavy rainfall event continues to take shape across south Texas through the lower Mississippi Valley.
USDA weekly crop progress data: slight improvement in corn, bean conditions…
The agency’s Monday afternoon crop conditions update saw corn and soybean conditions with minor improvement over the prior week. The corn crop was rated 68% “good” to “excellent” as of Sunday, up from 67% a week ago and in line with the average analyst estimate in a Bloomberg survey. Soybeans were rated 66% good to excellent, USDA said in its weekly report, also up a percentage point from last week and in line with expectations. USDA said 27% of the drought-hit winter wheat crop was rated good to excellent, up 2 percentage points from a week ago and the first improvement in five weeks. Winter wheat harvest was pegged at 25% complete, up from 11% last week and ahead of the 19% expected by analysts. The spring wheat crop was rated 55% good to excellent, up from 52% a week ago and topping the average estimate of 53%. The Pro Farmer Crop Conditions Index, or CCI, which compresses the USDA’s weekly crop progress report into a single, weighted, easy-to-track number that’s widely used to monitor the health and potential of US crops during the growing season, showed a 1.41-point decline to 372 for the U.S. corn crop. The soybean CCI rating declined despite the mild improvement in USDA’s national ratings, dropping 0.98 points to 366.86. The Crop Condition Index showed HRW wheat gaining 5.2 points to 239.85, while SRW increased 0.16 points to 365.28. Read all the state and national CCI ratings here.
NOPA soybean crush slows in May… The National Oilseed Processors Association said on Monday U.S. soybeans were crushed at a rate of 208.8 million bushels in May, according to Dow Jones Newswires, down from 211.9 million the previous month. That’s below what was expected from analysts surveyed by Reuters this month, which was over 216 million bushels. Stocks fell roughly 250 million bushels from the prior month, to 1.74 billion bushels in May. We were surprised to see the crush fall like it did, as the daily rate of 6.735 million bushels/day was down from 7.062 million bushels per day in April. The record of 7.457 million bushels per day stands alone with no other month coming close yet. Soyoil consumption totaled 2.653 billion lbs, the most since March and the second-highest total ever.
Pro Farmer crop consultant slightly raises his U.S. corn, soybean yield projections… Our crop consultant, Dr. Michael Cordonnier, this week slightly increased his U.S. corn and soybean yields. For corn, he said “without any threatening weather on the horizon, it looks like the crop will enter the critical July period under favorable conditions. Therefore, the U.S. corn yield was increased 1.0 bushels this week to 182.0 bu/ac).” He said the area to watch for corn is the western and northwestern Corn Belt, which could use additional moisture. For soybeans, Cordonnier raised his U.S. yield estimate by 0.5 bushel this week to 52.5 bu/ac. The area to watch for soybeans is also the western and northwestern Corn Belt, where those areas could use additional moisture.
Warsh-led Fed begins FOMC meeting today… Today’s meeting of the Federal Reserve’s Open Market Committee (FOMC) will be the first for new Chairman Kevin Warsh. Fed watchers expect 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 at this meeting, which ends Wednesday afternoon with an FOMC statement and press conference from Warsh. Meantime, the Bank of Japan today raised its benchmark interest rate to 1%. The BOJ said it would keep raising rates in response to developments in the economy and prices. The decision was widely expected, with some predicting the next BOJ rate hike could come as soon as October.
Weak China consumer spending, investment… China’s consumer spending and investment have slumped to levels unseen since the pandemic, with retail sales declining 0.6% last month from a year ago. Meantime, China’s industrial production climbed 4.5%, year-on-year, driven by a boom in exports and tech-related industries. However, the economy is at risk of a deeper slowdown due to weak domestic demand. The slump in retail sales and investment have reignited questions around China’s accuracy in gauging broader economic health, with some analysts estimating annual growth at near 4% in April, tracking below the government’s official full-year target.
Global central banks still stocking up on gold… More central banks than ever expect to increase their gold reserves, a sign one of the key forces behind bullion’s record-breaking rally remains intact despite this year’s pullback. In a survey of 74 central banks, 45% said they plan to buy in the coming year, the biggest-ever share in data collected by the World Gold Council and YouGov Plc since 2018. Just one said it planned to cut holdings, the WGC said in a report Tuesday and as reported by Bloomberg. “I think the fall in the price is an opportunity for some central banks to start buying in,” said Shaokai Fan, global head of central banks for the WGC, a trade body representing gold miners. The pace of gold buying by central banks sped up in the first quarter, even as Turkey, Russia and Azerbaijan began offloading metal. In the coming year, emerging-market and developing-economy central banks make up most of the prospective buyers, according to the WGC’s survey. About 53% of those respondents said they expect their holdings to increase, compared with 18% of advanced-economy central banks. The Bank of England, in the middle of the world’s biggest bullion hub in London, remains the most popular vaulting location for central banks, used by 57% of respondents.
Malaysian palm oil futures gain… Malaysian palm oil futures climbed about 1.7% to above MYR 4,500 per MT Tuesday, reversing losses in the previous two sessions as a weaker ringgit and firmer palm oil prices on the Dalian exchange boosted sentiment. Support also came from stronger exports, with cargo surveyors noting that palm oil shipments during June 1–15 rose between 9.6% and 23.8% from May. Simultaneously, El Niño is expected to reduce Malaysian palm oil yields by 8%–10% this year. However, gains were capped by weaker rival edible oils on Chicago markets. Meanwhile, Malaysia has cut its July crude palm oil reference price to a level that keeps the export duty unchanged at 10%. In top buyer India, palm oil imports edged higher in May from April’s four-month low but remained below normal levels. Analysts view the rally to lose momentum, citing the prospect of lower crude oil prices following the U.S.-Iran peace deal and weaker consumer spending in China, a key consumer. Markets will be closed Wednesday for a holiday.
Cattle futures bulls gaining more traction… August live cattle on Monday rose $2.075 to $243.25. August feeder cattle gained $4.125 to $361.55 and hit a three-week high. The cattle futures markets saw another session of price gains—making it three out of the past four with higher daily closes. The current total of screwworm cases in the U.S. now stands at 12 as of Tuesday morning, with all either in Texas or New Mexico. The NWS situation is so far leaning slightly friendly for cattle futures, but that could change. USDA at midday Monday reported last week’s cash cattle trading averaged $256.08, down 45 cents from the week prior.
Lean hog futures bears continue to press their case… August lean hog futures on Monday fell $0.575 to $95.775. The lean hog futures market saw renewed technical selling as the near-term charts remain 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 better corrective bounce in the near term. The latest CME lean hog index is down 15 cents at $92.75. Today’s projected cash index price is down 66 cents to $92.09. The national direct five-day rolling average cash hog price quote Monday was $96.85.