Good morning!
Grain futures lower overnight… At 6:00 a.m. CT, December corn was down 5 3/4 cents. November soybeans were 21 1/4 cents down and hit a two-week low. December soybean meal was $8.50 lower. December bean oil was 16 points lower. December SRW wheat was down 5 1/2 cents. December HRW was down 10 1/4 cents. Soybeans and meal led declines overnight as the Chinese update on last week’s Trump-Xi summit left out mention of U.S. soybeans. (See item below.) On tap today is the weekly USDA export inspections report and weekly USDA crop progress report. The key outside markets today see the U.S. dollar index firmer. November Nymex WTI crude oil prices are solidly higher and trading around $95.50 a barrel. The yield on the benchmark 10-year U.S. Treasury yield is presently 5.23% and hit a nearly 20-year high.
Soybeans “notably absent” from U.S.-China tariff/trade plan… “Soybeans are notably absent” from the U.S. and China detailed plan to cut tariffs on about $30 billion of imports from each country after last week’s summit between Presidents Trump and Xi Jinping, Bloomberg reported overnight. “Beijing has separately committed to buying 25 million metric tons from the U.S. annually through 2028. Placing soybean purchases on a separate track outside the Board of Trade gives Beijing leverage to restrain U.S. actions, especially ahead of the midterm elections in November, said Feng Chucheng, founding partner of Beijing-based Hutong Research,” Bloomberg reported. The proposed tariff relief spans Chinese toys, kitchenware and other household goods, as well as other U.S. agricultural products, coal and medical equipment. About 90% of the covered products would receive most-favored-nation treatment, China’s Commerce Ministry said in a Monday statement. The reductions will take effect once both sides complete procedures required under their domestic laws. “This arrangement will help to further stabilize China-U.S. economic and trade relations and create favorable conditions for China’s exports of relevant products to the U.S.,” the ministry said. “The expected relief for $60 billion in two-way trade was one of the most tangible outcomes of Xi’s state visit to Washington, even though the amount is a fraction of the $415 billion in total goods exchanged between the world’s largest economies last year,” said the report.
Potentially heavy rains for the southern Plains, Midwest… The National Weather Service today said a wave of low pressure over parts of the Northern Plains today will produce showers and thunderstorms with heavy rain over parts of the upper Midwest. There is a slight risk (level 2/4) of excessive rainfall over parts of the upper Midwest today into Tuesday morning. Tropical moisture associated with Hurricane Polo may cause considerable flash flooding across portions of eastern Nebraska into western Iowa Tuesday into Wednesday. Flash, urban, and river flooding impacts may also be possible starting mid-week across central Texas and southern Oklahoma. Meantime, the powerful Nor’easter is currently drifting near the New Jersey coastline and continues to bring coastal impacts and unsettled weather from the Mid-Atlantic to New England through today.
Crude oil prices rally after potential U.S.-Iran truce falls through again… Brent crude climbed above $107 and Nymex WTI futures above $95 per barrel overnight, recovering losses from the previous session after President Trump rejected Iran’s latest proposal to reopen the Strait of Hormuz, raising concerns that the restoration of oil flows through the critical waterway could face further delays. Trump also said Tehran had overplayed its hand and expects negotiations to resume this week. Meanwhile, Iran said it is waiting for a definitive U.S. response to its seven-day proposal to reopen the strait and other demands, adding that it will not ease its conditions after Trump rejected Tehran’s latest plan. Elsewhere in the Middle East, tensions remain high as Saudi Arabia intercepted Houthi drones heading toward Riyadh, along with a missile targeting Khamis Mushait in the south. Alerts were also issued in Abha and Jazan, where Aramco operates energy facilities.
Trump says ‘very seriously’ considering diesel ban… President Donald Trump on Sunday said the administration is still weighing a possible ban on diesel exports. “We’re thinking about it very seriously,” Trump told a Fox News reporter on Sunday, according to CNBC. “That can oftentimes lead to a little bit of an increase on gasoline for cars, so we’re looking at it very seriously. We may do it,” he said. Earlier, Bloomberg reported that Sen. Ted Cruz, R-Texas, had told refining industry leaders late Friday that the White House had offered assurances it won’t ban U.S. diesel exports. “Cruz’s message, described by people familiar with the matter who asked not to be named because the conversation was private, comes as the administration weighs options for slashing diesel prices amid a historic run-up in costs for the fuel,” said the report. Trump said last week he’d asked his staff to consider a potential ban on U.S. diesel exports, after rural and farm-state lawmakers appealed for limits to check retail prices that hit $6.53 per gallon for the first time ever last week. The president wants to see pump prices fall and is evaluating all options on the table, a White House official said last week. Representatives for Cruz and the American Fuel and Petrochemical Manufacturers Association, which conducted the call, did not immediately respond to requests for comment, said Bloomberg. “Cruz, a Republican from Texas, described having received assurances from the White House — not specifically from the president. He did not provide more specifics on who had ruled out an export ban, the people said. Neither Trump nor administration officials have decided on a single approach, as they continue analyzing the economic effects of a potential short-term diesel export ban,” said the report.
Russia, Ukraine continue to pound the other’s infrastructure… Russia’s weekend airstrikes killed at least four people across Ukraine and hit a data center in Kyiv, according to President Volodymyr Zelenskyy. Odesa Region Governor Oleh Kiper said on Telegram that a “massive” overnight strike damaged a medical facility, a hotel, a shop, and a warehouse for storing grain crops, among other things. Kremlin forces also struck two logistics centers in the Kyiv and Odesa regions, as well as a dry cargo ship on its way to the Odesa port, according to the defense ministry. At the same time, Russian air-defense systems shot down 96 drones fired by Ukraine over regions bordering Ukraine, the annexed Crimean peninsula and the Black Sea, the Defense Ministry said. Ukraine’s air forces said Russia launched 170 drones. “The warring countries continue to trade strikes with Kremlin’s full-scale invasion of Ukraine well into its fifth year and no sign of any peace deal. The U.S. has pushed both sides to agree to a pause on attacks of each other’s energy assets, but neither has accepted,” said Bloomberg.
El Nino and potential impact on Southern Hemisphere crops may be over-hyped… “There is much nervousness in the commodity marketplace about El Nino and its influence on world agriculture production,” says World Weather Inc. in a special report released late Friday. “That nervousness is about supply and demand, but there are many farmers operating in alarm mode because of the El Nino forecast and some of the added hype over its potential. Many market commentaries in recent weeks have raised discussion about the potential for South America weather to be adverse because of El Nino and some of that speculation has helped to support some market bullishness,” said the report. “The impact on Brazil production could be greater than past strong El Nino events since a greater portion of the nation’s crop is now produced in center-west, where there is some tendency for erratic and lighter than usual rain in El Nino events. Northeastern Brazil is normally most negatively impacted by El Nino and the region does produce a larger percentage of the crop than in 1965,1982, 1997 and 2015, which are the most recent very strong to super El Nino years. World Weather Inc. anticipates some influence but yield losses should be small. South America typically loses far less production from weather in an El Nino year than in a La Nina event, but that may be changing. One of the biggest reasons for greater concern about Brazil production is that there is a much greater percentage of soybeans produced farther north in the nation now than many decades ago,” said the report.
ICE raids southern Plains packing plants… Raids by Immigration and Customs Enforcement in southwest Kansas and elsewhere were blamed for packing plant interruptions that appeared to slow slaughter rates last week. In a joint statement, the Kansas Livestock Association, Oklahoma Cattlemen’s Association and Texas Cattle Feeders Association said they were closely monitoring ICE activity affecting agricultural communities in those states. The groups said they respect the responsibility of federal agencies to enforce the law but warned that sudden workforce disruptions can have far-reaching effects that extend beyond individual businesses.
Malaysian palm oil futures sell off… Malaysian palm oil futures extended losses Monday, remaining below MYR 4,700 per MT and hovering near a six-week low amid weakness in competing edible oils on the Dalian and Chicago markets. Bearish sentiment was reinforced by sluggish exports, with cargo surveyors estimating Malaysian palm oil shipments dipped 15.1%–24.3% in the first 25 days of September from the same period a month earlier. Meanwhile, expectations of higher Malaysian inventories and subdued Indian demand in September added pressure, although India’s recent duty cuts could support imports ahead of the festive season. Industry officials said the effects of El Niño have yet to materialize in palm oil production. Still, losses were tempered by firmer crude oil prices following President Trump’s rejection of Iran’s conditional offer to reopen the Strait of Hormuz. Meanwhile, a potentially shorter-than-usual wet season in Indonesia from November could pose risks to crop conditions.
Cattle futures bulls regain some footing… October live cattle futures on Friday fell $0.20 to $218.875 and for the week were up $2.95. November feeder cattle futures rose $3.90 to $331.975 and for the week up $13.975. The cattle futures markets traded mixed Friday, with live cattle seeing buying interest limited by slightly lower cash trade taking place. Technical buying was featured in feeders. USDA at midday Friday reported moderately active cash cattle trading on the week so far, with steers averaging $220.75 and heifers $220.61. The agency reported average cash cattle trading the week prior at $221.87.
Lean hog futures see more chart-based selling… October lean hog futures on Friday fell $0.975 to $78.225 and for the week were up 12 1/2 cents. The hog futures market saw more technical selling pressure as prices remain trapped in a downtrend on the daily bar chart. The latest CME lean hog index is down 27 cents to $82.20. Today’s projected CME index price is down $0.44 at $81.76. The national direct five-day rolling average cash hog price quote for Friday was $79.84. Lean hog futures prices are not far above their lowest levels in more than a year as wholesale pork values recently dropped to multi-year lows. Hog slaughter is above year-ago levels and average hog weights have edged higher, leaving the market with ample pork supplies.