Good morning!
Grain prices mixed to weaker overnight… As of 6:00 a.m. CDT, December corn was down 1 1/2 cents, November soybeans were up 1 3/4 cents and December winter wheat futures markets were 4 cents lower, with HRW hitting another new contract low overnight. Corn and soybean bulls are holding their own at mid-week, amid fledgling near-term price uptrends still in place on the daily bar charts. Soybean bulls are especially impressed by up-trending price action in soybean meal futures the past three weeks. SRW wheat prices appear to have stabilized the past couple weeks, but the HRW prices continue to bleed lower. The key outside markets today see the U.S. dollar index solidly higher. Nymex crude oil prices are slightly lower and trading around $63.25 a barrel. The yield on the benchmark 10-year U.S. Treasury note is presently 4.26 percent.
Rain in the Plains and cooler late this week… The National Weather Service today reported a series of disturbances from the western U.S. will interact with moisture spreading through the southern Plains, producing storms with heavy rainfall and scattered to numerous instances of flash flooding over the central Rockies and high Plains Wednesday and Thursday, which spread east through Kansas into northwest Arkansas on Wednesday and shift into the vicinity of Arkansas on Thursday. By Friday, thunderstorms with heavy rain across the high Plains and near the Gulf Coast are expected. Apart from the Northwest and the Gulf Coast states, daytime temperatures are expected to be seasonal to below average across much of the contiguous U.S. Temperatures may dip to more than 15 degrees below average in some spots, particularly where it is raining persistently across portions of Kansas and Arkansas Wednesday and Thursday and in the vicinity of Ohio on Friday. Record lows are possible across parts of the Ohio Valley, Mid Atlantic, and Northeast Wednesday night/Thursday morning.
China still holding back on buying U.S. soybeans… China, the world’s number-one soybean importer, doesn’t appear to have bought a single U.S. cargo for the coming year, just days before the start of the new U.S. marketing year, said Bloomberg today. China imposed retaliatory tariffs on U.S. soybeans in March, making exports to China less price-competitive, globally, and Chinese buyers are standing pat as the two governments negotiate an end to trade hostilities. China’s soybean crushers have already purchased large quantities of Brazilian soybeans in the past few months, with more on the way. Arrivals in the next three months are expected at over 30 million MT, according to Chinese commodities consultancy Mysteel. This decade, China has imported a total of between 90 million and 105 million MT of soybeans a year. Brazil had around 37 million MT — or roughly 22% of its crop — from last season still to sell as of Aug. 5, according to consultancy Safras & Mercado, as reported by Bloomberg. However, China avoiding U.S. soybeans is not risk-free. “Brazil can cover most of their needs, but seasonality makes it dangerous to rely only on South America,” said Kang Wei Cheang, an agricultural broker at StoneX Group Inc. in Singapore. “That’s why, even with politics in play, China usually comes back to U.S. beans when Brazil’s window tightens.”
USDA update on U.S. citizen contracting New World Screwworm… USDA Tuesday reported the U.S. Department of Health and Human Services (HHS) and the U.S. Centers for Disease Control and Prevention (CDC) recently identified an instance of a traveler-associated human case of New World screwworm (NWS) in the United States. “The U.S. Department of Agriculture reaffirmed its robust surveillance and trapping strategy, confirming there have been no detections of NWS in U.S. livestock. USDA, HHS, CDC, FDA and our other federal partners have led a robust government wide response to combat the New World Screwworm (NWS) in Mexico and prepare for all scenarios if it enters the United States.” On August 4, CDC, in coordination with the Maryland Department of Health, investigated a confirmed case of travel-associated NWS in a patient who returned from travel to El Salvador. “Currently, the risk to public health in the United States from this case is very low,” said a USDA press release. In support of CDC’s activities, USDA initiated targeted surveillance for NWS within a 20-mile radius of the affected area, encompassing portions of the District of Columbia, Maryland, and Virginia. To date, all trap results have been negative for NWS. There have been no detections of NWS in the U.S. in livestock or other animals since the last outbreak of NWS in the Florida Keys was resolved in 2017. USDA said there have been previous instances of traveler-associated cases of NWS in the United States in years past. “In all cases, these instances were isolated and designated as closed after precautionary targeted surveillance in the vicinity was negative. We may continue to see traveler-associated cases of NWS and USDA, in coordination with HHS and CDC, will conduct targeted surveillance to ensure there is no active spread of NWS in the United States. This is not cause for alarm as human risk is low and we have seen several isolated cases in recent years that have not resulted in livestock transmission,” said the USDA press release.
U.S. slaps 50% tariffs on India… The U.S. imposed a 50% tariff on Indian goods imported into the U.S. to punish the country for buying Russian oil, “upending a decades-long push by Washington to forge closer ties with New Delhi,” reported Bloomberg. The new tariffs will hit more than 55% of Indian goods shipped to the U.S. and hurt labor-intensive industries like textiles and jewelry the most, while key exports like electronics and pharmaceuticals are exempt. The tariffs threaten India’s export competitiveness and raise questions about Prime Minister Narendra Modi’s ambitions to transform the South Asian nation into a major manufacturing hub, with exporters bracing for falling orders and possible job cuts, said Bloomberg.
European Union wants to remove tariffs on U.S. industrial products… The European Union will seek to fast track legislation by the end of this week to remove all tariffs on U.S. industrial goods, a demand made by President Trump before the U.S. will lower its duties on the EU’s automobile exports, Bloomberg reports. The European Commission, which handles trade matters for the EU, will also give preferential tariff rates on certain seafood and agricultural goods, according to people familiar with the matter. The EU has conceded that the trade arrangement favors the U.S. but that the accord is necessary to give EU businesses stability and certainty. Commission President Ursula von der Leyen previously described it as “a strong, if not perfect deal.”
Stock traders bracing for Nvidia earnings this afternoon… Nvidia Corp. delivers its quarterly earnings report after the closing bell today and options traders are betting that report will move the stock market. Activity in the stock options market suggests traders are preparing for a big impact when the world’s largest chipmaker gives an update on sales and profits from its artificial-intelligence products. Nvidia is the world’s most valuable company, at 8% of the S&P 500 Index by weighting.
Hong Kong money market rate may be an early warning… Veteran market watchers know that history shows September and October can be extra turbulent trading months for the stock and financial markets. As that timeframe approaches there may be an early warning coming from Hong Kong this week. Financial liquidity conditions in Hong Kong resumed tightening this week, with a key money-market rate climbing above a level that some analysts say may dent an economic recovery for Hong Kong. The benchmark one-month Hong Kong Interbank Offered Rate — or Hibor — jumped above the closely watched threshold of 3% Wednesday, reaching the highest since May. If the gauge remains above that level it could have a negative impact on the Hong Kong economy as investors would become more cautious, and borrowing demand would fall, Morgan Stanley analysts wrote in a note last week, as reported by Bloomberg.
Malaysian palm oil futures rebound at mid-week… Malaysian palm oil futures traded notably higher Wednesday, hovering above MYR 4,500 per MT and halting a two-day slide. Prices saw support from a weaker ringgit and stronger export outlook, with cargo surveyor data showing shipments of Malaysian palm oil products rose 10.9%–16.4% during August 1–25 from the same period a month earlier. Also lifting sentiment were signs of festive-led demand in India ahead of Diwali in mid-October, news that Indonesia reportedly secured a U.S. tariff exemption deal on commodities including palm oil, and Malaysia’s contingency plans to safeguard exports under EU deforestation rules.
Cattle futures markets extend very mature bull runs… October live cattle on Tuesday rose $1.375 to $238.20 and set a contract high. September feeder cattle rose $3.15 to $365.05 and hit a contract/record high. Solid cash market fundamentals and no strong, early technical clues that market tops are close at hand are keeping cattle bulls in the driver’s seat. USDA Monday reported cash cattle prices traded at an average of $244.25, up from $242.01 the week prior. Packers continue to bid up for historically short feedlot supplies, amid still-strong consumer demand for beef at the meat counter. Solid gains in boxed beef cutout values Tuesday also fueled the cattle market bulls.
Lean hog futures post solid rally Tuesday… October lean hogs Tuesday rose $2.025 to $93.425 and hit a six-week high. The hog futures market saw good technical buying featured and were also supported by new contract highs scored in the live and feeder cattle futures markets. Cash hog and pork market fundamentals are slipping a bit, which has the hog futures bulls a bit worried about extending the recent gains. The latest CME lean hog index is down 57 cents to $107.27 as of August 22. Wednesday’s projected CME index price is down 41 cents at $106.86. The national direct five-day rolling average cash hog price quote Tuesday was $108.71.
Today’s reports—Wednesday
-- Broiler Hatchery 2:00 pm CDT
-- U.S. & Canadian Cattle 2:00 pm CDT
-- U.S. & Canadian Hogs 2:00 pm CDT
-- Livestock and Meat Domestic Data (1:00 pm CDT)
-- National Dairy Products Sales Report – weekly (approx. 2:00 pm CDT