Good morning!
Grain futures mostly weaker overnight… At 6:00 a.m. CDT, December corn was steady and hit a contract and three-year high overnight. November soybeans were 5 1/4 cents down and hit a contract and 2.5-year high overnight. December soybean meal was down $4.60. December bean oil was 29 points down. December SRW and HRW wheat were around 10 cents lower. The grain futures markets are seeing a pause and modest corrective pullbacks to start the trading week and on this last day of the month. The past three weeks have seen the grain markets explode higher. Friday’s CFTC commitments of traders report showed the big funds loading up on the long side of the boat in corn and soybeans, which could be a blessing for the bulls, or a curse. (See item below.) On tap today are the weekly USDA export inspections and weekly crop progress reports. The key outside markets today see the U.S. dollar index weaker. October Nymex WTI crude oil prices are sharply higher and trading around $86.50 a barrel. The yield on the benchmark 10-year U.S. Treasury yield is presently 4.7%.
U.S., Iran exchange military strikes… The U.S. and Iran exchanged strikes for the first time in about a month as American forces hit an island in the Strait of Hormuz and Iran responded by launching attacks on the United Arab Emirates and Jordan. Iranian media also said the country’s authorities seized a bulk carrier near the port of Bandar Abbas in the strait and claimed an oil supertanker trying to go through the waterway was hit by mines early on Monday. The incidents underline the high tensions between Washington and Tehran, with the countries still at odds over the status of the Strait of Hormuz and unwilling to restart negotiations to end a war now more than six months old,” said a Bloomberg report. Crude oil prices rose sharply, with Brent climbing 2.4% to above $90 a barrel. European natural gas prices increased too. WTI Nymex crude oil futures rose above $86 a barrel. “Several current and former U.S. and Iranian officials have said they expect the conflict to drag on for months, with the sides essentially deadlocked and bouts of fighting puncturing weeks-long lulls in hostilities,” said the report. It was a “limited, precise action,” U.S. Central Command said. “Iran created the threat and the U.S. military eliminated it to protect civilian mariners, commercial shipping, and the free flow of global commerce.” Iran said several people were killed in the US strikes. Iran retaliated with a missile-and-drone attack on U.S. air bases in Jordan early Monday. Jordan’s military intercepted eight missiles, destroying them before they caused any damage, the Jordan News Agency reported.
Showers/thunderstorms over central U.S.; hot temps in southern half of central U.S. … The National Weather Service today said showers and thunderstorms are forecast from the Great Lakes southwestward to the central Plains today. Heat will build over parts of the middle Mississippi Valley and central/southern Plains today into Tuesday. The south-central U.S. will see high heat continue into the end of the week.
“War, Weather Push Crop Prices to Biggest Monthly Gain Since 2012”… That’s a Bloomberg headline overnight. “Crop prices are set to cap their biggest monthly jump in more than a decade as wars and extreme weather disrupt supplies, raising concerns about food inflation. The Bloomberg Agriculture Spot Index is up more than 13% in August as of Friday, heading for the steepest gain since July 2012, with wheat, sugar, and cocoa being major drivers. Wars and extreme weather are disrupting supplies, with grain exports from Ukraine and Russia slowed, and a strengthening El Niño fueling weather worries for crops like cocoa and sugar,” said the report.
Big corn, soybean fund traders rapidly move to the long side of the boat. This could be a blessing for bulls, or a curse… Friday afternoon’s latest CFTC commitments of traders report for the grain futures markets (for the week ending August 25) showed that managed money and speculative funds aggressively expanded their bullish bets across major grain futures markets. Large specs drastically increased their net long positions, pushing some markets to multi-year high fund exposure. For corn, managed money added 126,008 contracts to their net long position. That brought their total net long position to 376,513 contracts--the largest speculative long position since April of 2022. Outright speculative longs reached a record high of 465,500 contracts by last Tuesday. For soybeans, managed money added 46,592 contracts to their net long position. That brought their total net long position to 198,254 contracts as of last Tuesday. Chicago SRW wheat saw big specs reduce their net short position by 12,314 contracts, shrinking their remaining net short to 14,171 contracts. That is effectively another bullish shift, as funds bought back a large portion of their previous bearish exposure (short covering). Kansas City HRW wheat funds added another 9,227 contracts to their growing net long position, pushing the total to 44,062 contracts. Veteran traders know that too many bulls—including big specs--on one side of the boat can foretell a very mature bull move that has seen prices already run most of their course.
Grain traders await expected EPA small refinery waivers ruling today… The Environmental Protection Agency’s decision on a big backlog of pending Small Refinery Exemptions (SRE) under the Renewable Fuel Standard is expected today. That’s the deadline the agency set to clear the waivers. “This upcoming announcement represents one of the most consequential agricultural policy events of the year. It carries direct, high-stakes implications for the value of soybean oil, corn ethanol, soybeans, and Renewable Identification Number (RIN) credits,” said Ag Bull Media. “Reports indicate the Trump administration is considering large SRE waivers that could free up between 1.2 billion and 1.8 billion RINs for oil refiners. Traders fear an aggressive waiver package could instantly erase up to 500 million gallons of domestic biodiesel and ethanol demand, pulling down corn and soybean cash prices right ahead of harvest,” said Ag Bull.
Diesel fuel crunch to hit Brazil farmers at planting time… Brazil is about to kick off its main planting season but farmers aren’t celebrating due to the global diesel crunch colliding with a seasonal spike in demand for the fuel. “The country is the world’s biggest exporter of many key crops and needs diesel to power tractors and trucks, with a squeeze in farmer costs potentially rippling through global supply chains,” said a Bloomberg report. “Brazil is again becoming very dependent on American imports, which could potentially translate into higher prices in the U.S., the world’s largest supplier of the fuel, just ahead of midterm elections. Brazil is the largest diesel importer after Australia. “The seasonal overlap of planting soybeans and harvesting corn drives diesel demand to peak levels, nearly 200,000 barrels a day above off-season patterns,” said the report Meantime, Russia further extended a ban on diesel exports for producers to keep the domestic market supplied amid intensified Ukrainian attacks on the nation’s refineries. The government extended the ban until Sept. 30, it said in a website statement on Saturday. “The decision has been taken to support stability of the domestic fuel market,” it said. Separately, Goldman Sachs stepped up warnings of tightness in global refining. “Diesel remains at the epicenter.” Refinery outages are running 60% above seasonal norms, and product stockpiles are falling despite the loss of some demand, Goldman said.
U.S. set to control 65 billion barrels of Venezuelan crude oil… The U.S. is set to take majority control over a huge amount of Venezuela’s oil wealth in an unprecedented maneuver that officials said would create the world’s second-largest private oil company by reserves. President Trump announced Friday that the U.S. will control 55% of the effective output from the joint venture, and will obtain the oil at cost, with the venture having 100-year concessions for oil fields totaling about 65 billion barrels of proven reserves. “The plan represents an untested maneuver that could be vulnerable to legal challenges and political shifts in Washington, with some criticizing the lack of a democratic transition or a timetable for elections as part of the deal,” said a Bloomberg report.
Key takeaways from Fed’s Jackson Hole central banker symposium late last week… Fed Chair Warsh used a keynote speech to hammer home a message that curbing inflation is the U.S. central bank’s top priority. Warsh’s comments leaned hawkish and immediately triggered a jump in expectations for a near-term U.S. interest rate increase. Attention turns to the next round of consumer inflation data, due Sept. 11, just days before FOMC policymakers gather in Washington on Sept. 15-16. While Warsh didn’t signal explicitly his support for a rate hike, he warned inflation isn’t meaningfully slowing and that policymakers must be confident it is. Otherwise, he said, they had “work to do.” Meantime, eurozone policy makers who spoke on the sidelines of the conference sent a warning about inflation, with some suggesting the need to hike rates in September. Bank of England Governor Andrew Bailey suggested no urgency to increase rates, saying “we can watch this situation for the moment” due to subdued second-round effects and a softening labor market. Bloomberg
Putin, Xi, Modi meet this week to discuss security… The Shanghai Cooperation Organization summit will gather leaders including China’s Xi Jinping, Russia’s Vladimir Putin, and India’s Narendra Modi to discuss security and economic issues amid U.S. pressure on Iran. The U.S. campaign against Iran is testing the limits of the security grouping, which has grown substantially in recent years but has largely failed to translate its geopolitical ambition into concrete mechanisms for action. The SCO’s leaders are expected to offer symbolic solidarity with Iran, but may be hesitant to shine a spotlight on the organization’s ineffectiveness in protecting the security of one of its member countries, said Bloomberg.
Malaysian palm oil futures higher… Malaysian palm oil futures on Monday hovered near MYR 4,850 per MT, rebounding from recent declines as firmer rival edible oils on Dalian and Chicago exchanges lifted sentiment. Elevated crude oil prices and mounting El Niño risks, which stoked concerns over dryness and weaker output across Southeast Asia, added support. Indonesia’s planned full rollout of its B50 mandate on October 1 is also expected to bolster domestic consumption and trim exportable supplies. However, futures were headed for their first weekly loss after three straight gains, down about 3.3% so far. Broader weakness reflected softer demand and ample supply, with cargo surveyors noting palm oil exports for August 1–25 fell between 11.4%–20% from July. Meanwhile, inventories hit a five-month high in July, intensifying supply pressure. Demand from India may face further headwinds as refiners turn to cheaper soyoil, with imports in August projected to be strong, underscoring shifting preferences in the world’s largest buyer.
Cattle futures markets see more selling pressure… October live cattle futures on Friday fell $1.20 to $211.725 and for the week down $6.20. November feeder cattle lost $1.55 to $309.925 and for the week were down $6.325. The cattle futures markets saw renewed technical selling pressure Friday as both markets remain trapped in price downtrends on the daily bar charts. USDA at midday Friday reported active cash cattle trading late last week at lower money, with steers averaging $218.65 and heifers $218.63. The agency reported average cash cattle trading the week prior at $225.01. The southern border reopening and President Trump’s move to allow tariff free beef imports aimed at lowering prices have weighed on cattle markets recently, pushing live and feeder futures near nine-month lows. Softening cash fundamentals have compounded the pressure.
Lean hog futures see short covering… October lean hog futures on Friday rose $1.275 to $81.90, hit a two-week high and for the week were up $1.025. Chart-based specs continued to press the futures market to the downside in early trading Friday, as technicals remain firmly bearish. However, short covering and perceived bargain buying late in the session pushed prices higher. Futures prices remain in a downtrend on the daily bar chart. Still-declining cash hog prices also favor the lean hog futures bears. The sell off in the cattle futures market recently is also still bearish for lean hog futures. The latest CME lean hog index is down 28 cents to $92.14. Today’s projected CME index price is down another 62 cents at $91.52. The national direct five-day rolling average cash hog price quote for Friday was $91.62.