Good morning!
Grain futures mixed overnight… At 6:00 a.m. CT, December corn was down 1 cent. November soybeans were 1/2 cent higher. December soybean meal was down $1.70. December bean oil was 23 points higher. December SRW wheat was 4 3/4 cents higher and December HRW was steady. To start the trading week the grain markets are pausing and consolidating at elevated price levels. It seems the markets need a fresh, bullish fundamental spark to reignite the price uptrends. On tap today is the weekly USDA export inspections report and the weekly USDA crop progress reports. The key outside markets today see the U.S. dollar solidly higher. October Nymex WTI crude oil prices are sharply up and trading around $103.00 a barrel. The yield on the benchmark 10-year U.S. Treasury yield is presently 4.96%.
“Oil Jumps as Shutdown of Saudi Pipeline Deepens Energy Crisis”… That’s a Bloomberg headline overnight. “Oil prices rose after Saudi Arabia closed a major crude pipeline following attacks, disrupting a key route that bypasses the Strait of Hormuz. The closure may lead to output cuts if it is prolonged, according to June Goh, senior oil market analyst at Sparta Commodities SA. A meeting between Iran and several Gulf nations on creating a temporary shipping lane through Hormuz was postponed, amid a rapid military advance by Iranian-backed Houthi militants in Yemen,” said the report. Brent crude oil futures rose as much as 3.7% to above $108 a barrel, before paring gains, while West Texas Intermediate was near $103. Saudi Arabia said late on Friday that it had halted the East-West pipeline as a precaution after attacks the previous day. There’s been no indication of when operations will resume.
Persistent rains and thunderstorms in the U.S. heartland … The National Weather Service today said a very moist airmass moves into the heartland today, which will set the stage for widespread showers and thunderstorms beginning this morning. Numerous instances of flash flooding and scattered severe weather is a concern a later today over portions of the central Plains as multiple rounds of thunderstorms develop in this very moist and unstable environment. While a cold front is forecast to slowly sink southward, unsettled weather will linger across the Plains, enhancing the flash flood threat through midweek. Coverage of afternoon showers and thunderstorms will also increase over the southern Rockies and Four Corners this week, supporting daily chances of scattered flash flooding. Meanwhile, an upper-level ridge moving across the mid/lower Mississippi Valley will maintain dangerously hot weather with highs well into the 90s and low 100s this week, which could set several daily high temperature records.
Trump says summit meeting with Xi still on… President Trump said he is not worried that Chinese President Xi Jinping will cancel a highly anticipated visit later this month. “No, I’m not worried about that,” Trump told reporters as he attended the Irish Open in Doonbeg, Ireland, on Sunday, Bloomberg reported. “We have a great relationship. He wants to get along, and we want it. We’re going to get along.” Trump’s comments follow a recent report that China had warned the U.S. that it would scrap Xi’s upcoming visit if the U.S. approved new arms sales to Taiwan, a major point of contention for Beijing. Trump has said he is weighing a $14 billion arms deal with Taiwan, the self-governing democratic island, that China sees as part of its country. Xi has warned Trump in the past that there is a potential for conflict if the issue of Taiwan is mismanaged.
Another farm bill vote expected this week… Senate Agriculture Committee Chair John Boozman, R-Ark., plans to hold another committee vote this week on his stalled farm bill to push farmer-friendly policies forward ahead of the midterms, Politico reports. The package stalled in August due to Democratic opposition over Supplemental Nutrition Assistance Program (SNAP) cuts and the absence of recovering Sen. Mitch McConnell, R-Ky. While Boozman hopes McConnell can return to vote, he intends to proceed regardless, the report said. Democrats are demanding a two-year delay before states must share SNAP costs. Boozman confirmed to Politico that his current proposal — a one-year delay — remains his final offer to Democrats.
Greenback rallies ahead of Fed’s FOMC meeting… The dollar index is posting strong gains today, gaining for a fourth consecutive session as traders and investors prepare for this week’s Federal Reserve FOMC policy meeting while assessing the impact of surging oil prices. Markets are currently pricing in an 86% probability that the Fed will raise its fed funds policy rate by 25 basis points on Wednesday, with another hike expected later this year. Data released Friday showed U.S. consumer inflation held steady at 3.4% in August, matching July’s reading and market expectations, while underlying inflation came in above forecasts as core CPI rose 0.3% month-on-month. Higher oil prices added further inflationary pressure after Saudi Arabia shut down the critical East-West pipeline, which provides an alternative route around the Strait of Hormuz. Reads a Bloomberg headline today: “Fed’s Warsh on Collision Course with Trump as Rate Hike Looms.”
EPA to ease emission standards for fossil fuel-fired power plants… The U.S. Environmental Protection Agency is expected to formally rescind carbon pollution standards for fossil fuel-fired power plants as soon as today, Bloomberg reports. The agency plans to scrap Biden-era mandates requiring U.S. fossil fuel-fired power plants to deploy specific emissions-reduction technologies to cut their greenhouse gas emissions. Agency officials also plan to propose a separate rule repealing the federal finding that greenhouse gases from power plants pose a threat under the Clean Air Act.
As diesel prices soar, Trump tells Ukraine to stop attacking Russian oil refineries… President Trump warned Ukrainian President Volodymyr Zelenskyy to stop targeting oil refineries in Russia amid strikes that have shut down diesel refining. “Mr. Zelenskyy has to do one thing: He has to stop knocking out diesel fuel in Russia,” Trump said Sunday on the sidelines of the Amgen Irish Open at his golf course in Doonbeg, Ireland, according to Bloomberg. “Let him go after targets — but not diesel fuel, because he’s causing a shortage of diesel.”Ukrainian strikes on oil refineries have led to widespread fuel shortages in many Russian regions and have added pressure to a global market already squeezed by the war in the Middle East.
Malaysian palm oil futures prices rise… Malaysian palm oil futures hovered above MYR 4,850 per MT Monday, reversing recent declines amid gains in rival edible oil markets. Bargain hunting also emerged after prices hit a two-week low. Firmer crude oil, underpinned by escalating Middle East hostilities, enhanced palm’s competitiveness as a biodiesel feedstock. Supply concerns also lingered, with unusually dry conditions and reduced fertilizer use in Indonesia and Malaysia raising risks to output. Still, upside momentum was checked by bearish monthly data from the Malaysian Palm Oil Board: August inventories climbed 7.5% to an eight-month high of 2.82 million MT, production edged up 1.4% to 1.82 million MT, and exports fell 7.5% to 1.29 million MT. Meanwhile, early September shipments remained weak, with cargo surveyors reporting an 11.7–17.5% drop in exports in the first 10 days versus August. Market caution also prevailed ahead of China’s August activity data later this week, with traders eyeing demand signals from another major palm oil buyer.
Cattle futures markets rally despite weaker cash cattle market… October live cattle futures on Friday rose $1.85 to $219.675, hit a three-week high and for the week were up $6.725. November feeder cattle futures gained $5.40 to $328.175, hit a four-week high and for the week were up $13.45.The cattle futures markets bulls had a very good holiday-shortened trading week, including technically bullish weekly high closes Friday that suggest follow-through, chart-based buying interest early this week. USDA at midday Friday reported still-very-light cash cattle trading, with steers and heifers averaging $218.00. The agency reported average cash cattle trading the week prior at $219.06.
Lean hog futures bulls fade… October lean hog futures on Friday fell $1.625 to $81.525 and for the week down 77 1/2 cents. The hog futures market saw more profit-taking from the shorter-term spec traders to produce a technically bearish weekly low close Friday that suggests some follow-through, chart based selling pressure early this week. The latest CME lean hog index is down 57 cents to $88.22. Today’s projected CME index price is down 85 cents at $87.94. The national direct five-day rolling average cash hog price quote for Friday was $87.72.