Good morning!
Grain futures mostly higher overnight… At 6:00 a.m. CDT, December corn was up 3 1/2 cents. November soybeans were 6 3/4 cents higher and near the recent contract high. December soybean meal was up $3.10. December bean oil was 42 points lower. December SRW wheat was 1 1/4 cents higher and December HRW was down 1 cent. Soybeans led gainers overnight on news China has stepped up its buying of U.S. soybeans. (See item below.) The data point of the week for the grain markets is Friday’s USDA crop production and monthly supply and demand reports. USDA will also release its weekly export sales report Friday — delayed one day due to the Monday holiday. The key outside markets today see the U.S. dollar index slightly higher. October Nymex WTI crude oil prices are higher, hit a three-month high and are trading around $97.00 a barrel. The yield on the benchmark 10-year U.S. Treasury yield is presently 4.85%.
China buys 1 million MT of U.S. soybeans just ahead of Xi visit to U.S.: report… China has bought around 1 million MT of U.S. soybeans this week, four traders told Reuters, as the world’s top oilseed buyer steps up purchases ahead of Chinese President Xi Jinping’s visit to Washington, D.C., later this month. “The purchases take China’s total U.S. soybean buying to nearly half of the 25 million MT the White House said Beijing had committed to annually through 2028. ’There have been more purchases made by Sinograin in the past few days,’ said one Asia-based trader. ‘They have been buying before Xi’s visit to U.S.,’ “ said the Reuters report. State buyers Sinograin and COFCO did not immediately respond to Reuters requests for comment. USDA on Wednesday reported 340,000 MT of U.S. soybean sales to China and another 100,000 MT to unknown destinations. “While China’s purchases of U.S. soybeans could help bolster trade and diplomatic ties with Washington, the buying also coincides with tightening global oilseed supplies amid dwindling inventories in top exporter Brazil,” said the report.
Brent crude oil above $102 a barrel, WTI above $97 as U.S.-Iran strikes intensify… Crude oil prices are surging again and are at three-month highs amid little indication that the U.S.- Iran war is abating. Brent, the global benchmark, extended a rally that saw futures jump to triple figures for the first time since July in the previous session. “Renewed fighting over the past week has ended a period of relative calm, and the prospect of a lengthy conflict is fanning renewed fears of energy-driven inflation as prices for natural gas and diesel also surge. Iran has no intention of backing down in the face of an American naval blockade and will escalate its strikes if the U.S. continues attacking its territory, according to a senior official from the Islamic Republic,” and as reported by Bloomberg. Meanwhile, President Trump said the war would only end after the November midterm elections and that significant gasoline price relief would not come before then, signaling little prospect of a near-term de-escalation in the conflict, now in its seventh month.
“Surging Tanker Rates Signal a Deepening Global Energy Crisis”… That’s a Bloomberg headline overnight. “Global tanker freight rates are surging to record levels due to a drawn-out conflict in the Persian Gulf and complex workarounds. Earnings for supertankers on the Middle East-to-China route are at a record of nearly $800,000 a day, and daily earnings for VLCCs (very large crude carrier) are expected to stay above $100,000 a day into next year. The market is stressed with bottlenecks, and freight rates are reacting sharply with no end in sight to the U.S. war in Iran, and traders and shippers expect longer workarounds and inefficient modes of delivery to continue,” said the report. Meantime, an unusually active typhoon season is disrupting shipping operations across Asia, with Shanghai particularly hard hit by snarled traffic and vessel delays. The average waiting time at Chinese ports has increased to 3.38 days per vessel, with Shanghai seeing barely one-fifth of container ships arrive on time in July.
Showers/thunderstorms linger in eastern half of U.S. … The National Weather Service today said a cold front dropping into the northern tier of the U.S. will drive showers and thunderstorms across the northern-central Plains and the upper Midwest on Friday. The greatest threat with this system will be severe weather and the Storm Prediction Center has a slight risk for severe thunderstorms all along this boundary as it moves through. Locally heavy rainfall is also possible, especially across portions of northern Minnesota and the U.P. of Michigan. Meantime, a cold front will be the focus for widespread showers and thunderstorms from the Ohio Valley into the central Plains today. Locally heavy rainfall and strong to locally severe weather is possible. The front sinks into the Southeast and stalls on Friday, with widespread showers and storms expected across the Southeast to Tennessee Valley and parts of the southern mid-Atlantic. Widespread heat threats will persist in the southern Plains to parts of the lower Mississippi Valley. Widespread major to extreme heat risk is forecast, especially across parts of Texas where a dangerous heat wave has been relentless. The cold front into the Southeast on Friday may bring some relief to northern areas, but Texas heat will continue into this weekend.
European drought, Black Sea disruptions may mean more U.S. corn exports to Europe… A Politico report notes that this summer’s European drought and the virtual shutdown of Ukraine’s cheapest export routes is seen creating an opening for U.S. corn. Alexander Döring, secretary general of FEFAC, which represents Europe’s animal-feed industry, told Politico that buyers are looking mainly to North and South America to cover the expected jump in imports, saying his group sees little scope for Ukraine to supply much of the extra corn Europe needs. The EU expects to import around 25 million metric tons of corn between July this year and next June, up from 19.3 million over the previous 12 months, after domestic production fell by roughly 10 million tons, according to Louise Bogey, a European Commission spokesperson for agriculture. Ukraine typically supplies around half of the bloc’s imported corn, she added.
Record Argentine corn exports ahead… Argentina’s corn exports are set to hit a record 10 million metric tons in August and September, Reuters reported, the result of a bumper harvest and strong international demand tied in part to Europe’s crop woes and Ukraine’s export bottlenecks. “Argentine corn right now is very competitive in price and in volume,” Gustavo Idigoras, head of the CIARA-CEC grains exporters and crushers chamber, told Reuters. Normal export volumes for August-September typically reach about 3 million tons, he said. Idigoras said demand from North African countries — typically buyers of Ukrainian grain — has been the main driver.
ASA welcomes 45Z guidance… The American Soybean Association (ASA) welcomed new federal guidance from the U.S. Department of Energy (DOE) and Internal Revenue Service (IRS) providing clarity on the 45Z Clean Fuel Production Credit. However, the group emphasized that more work is needed on a flexible “book-and-claim” accounting system — a tracking method that lets producers claim carbon credits based on sustainable farming practices without needing to physically segregate low-carbon crops throughout the supply chain. “These actions provide greater economic certainty for the biofuels industry, which is a critical source of domestic demand for U.S. soybeans,” said Dave Walton, ASA vice president and Iowa soybean farmer, in a statement Wednesday. ASA said it would continue advocating for a flexible book-and-claim system.
Bessent bond move backfires… The Treasury Department on Wednesday announced it would buy back $6 billion worth of 10- to 20-year government bonds, aiming to boost prices and drive down yields. Instead, Treasury yields jumped sharply after the announcement, with the 10-year rate trading as high as 4.85%, the highest since November 2023, while the 30-year bond yield rose as high as 5.3%. Yields rise as Treasury prices fall. Treasury last month had said it would at least double buybacks of longer-term bonds from a maximum of $2 billion per operation. Treasury Secretary Scott Bessent and officials have described lowering bond yields as a priority. “Some investors said the Treasury Department is now in a difficult position because expectations for the size of repurchases are high, yet it could be difficult to truly impress the market without relaxing guidelines that it will only buy bonds at prevailing market prices,” the Wall Street Journal wrote. Bessent’s efforts to jawbone the bond market have been met with skepticism on Wall Street, given that they aren’t tackling the forces pushing yields higher, such rising inflation, the U.S. budget deficit and the war in Iran. President Trump’s promise of a national cash payout for a Republican Party mid-term election victory is also injecting fresh uncertainties into the U.S. Treasury market ahead of today’s 30-year bond auction.
U.S. producer price inflation data out this morning… U.S. producer prices are expected to rise 0.4%, month-over-month, in August, which would mark the strongest increase in three months after remaining unchanged in July and would signal a renewed acceleration in producer-level inflation. Core producer prices, which exclude the more volatile food and energy components, are forecast to rise 0.3% month-on-month, accelerating from the 0.2% increase recorded in July. On an annual basis, headline PPI inflation is expected to accelerate to 5.3%, up from 4.7% in July, while core producer inflation is projected to increase to 4.6% from 4.2% annually.
ECB expected to raise interest rates today… The European Central Bank is expected to raise its key interest rates by 25 basis points today, marking the second hike since the U.S.-Iran war began, while signaling caution over further increases that could weigh on economic activity. The main refinancing rate is expected to rise to 2.65%, and the deposit rate to 2.5%. Eurozone inflation accelerated to 3.3% in August, its highest level in three years and well above the ECB’s 2% target. However, there have been few signs of the second-round inflation effects policymakers typically fear when energy prices surge, as they have since the war closed the Strait of Hormuz. Economists remain unconvinced that further tightening will be necessary, warning that additional hikes could risk recession. Interest-rate futures, however, are pricing in a third hike by December, while policymakers continue to flag upside risks to inflation and the recent rise in bond yields adds further uncertainty to the policy outlook. TradingEconomics.com
Malaysian palm oil futures prices dip… Malaysian palm oil futures fell around 1.3% to MYR 4,900 per MT Thursday, extending their recent drop to a one-week low. Sentiment was pressured after Malaysian Palm Oil Board data showed inventories rose 7.48% mom in August to an eight-month high of 2.82 million MT. Meanwhile, exports fell 7.5% to 1.29 million MT, with production adding 1.39% to 1.82 million MT, reinforcing concerns over ample supply. Risk appetite was further weighed by weaker edible oil prices in Dalian and Chicago and a stronger ringgit. In India, heavy edible oil buying has congested major ports, delaying vessel unloading by up to 10 days as storage tanks overflow, potentially curbing near-term import demand. Still, losses were capped by elevated crude oil prices, with Brent breaching $100 a barrel amid renewed Middle East tensions, boosting palm oil’s appeal as a biodiesel feedstock. Dry weather across Southeast Asia also fueled concerns over yields following fires and haze in Borneo and Sumatra.
Live cattle futures see corrective pullback; feeders consolidate… October live cattle on Wednesday fell $1.175 to $215.85 and hit a two-week high early on. November feeder cattle rose $0.90 to $321.35 and hit a three-week high. The live cattle futures market saw a corrective pullback from Tuesday’s solid gains, while feeder futures saw a pause and some chart consolidation. October live cattle futures continue to trade at a discount to the cash cattle market, which is also supportive for futures. USDA at midday Wednesday reported no cash cattle trading so far this week. Last week’s cash trade averaged $219.06. The agency said cash cattle trade the week prior averaged $219.25.
Lean hog futures weaker on profit taking… October lean hog futures on Wednesday fell $1.175 to $83.075. The lean hog futures market saw a corrective pullback and profit taking following Tuesday’s good gains. There are still near-term technical clues that lean hog futures have put in a price bottom. The latest CME lean hog index is down 89 cents to $89.65. Today’s projected CME index price is down another 86 cents at $88.79. The national direct five-day rolling average cash hog price quote for Wednesday was $87.57.