Good morning!
Grain futures rally in a weather market… At 6:00 a.m. CDT, December corn was up 5 1/4 cents and hit a six-week high. November soybeans were up 5 3/4 cents and hit a seven-week high. September soybean meal was up $0.90 and hit a six-week high. September bean oil was up 102 points and hit a four-week high. December SRW and HRW wheat markets were both down 2 cents but hit six-week highs early on. A heat wave that baked the Northern Plains over the weekend is expected to spread eastward this week, impacting the western Corn Belt. Nighttime temperatures in that region will remain very warm this week, which is not good for the pollinating corn crop. An extreme heat wave is also still gripping western Europe and hurting major crops there. Meantime, Russia and Ukraine are attacking each other’s grain infrastructures. All of the above are combining to make a bullish tonic for grain traders early this week. On tap today is the weekly USDA export inspections report this morning and the weekly USDA crop progress data this afternoon. The key outside markets today see the U.S. dollar index slightly down. August Nymex WTI crude oil prices are higher and trading around $73.00 a barrel. The yield on the benchmark 10-year U.S. Treasury yield is presently 4.6%.
Total New World screwworm cases detected in U.S. now at 35… The USDA Animal and Plant Health and Inspection Service (APHIS) on its NWS website is now reporting 35 total New World screwworm detected cases in the U.S. There are 19 active cases, all still in Texas.
Extreme heat in the northern Plains will be shifting east… World Weather Inc. issued a special report Sunday evening detailing excessive heat that developed in the northern Plains during the weekend, as expected, with extreme highs up to 115 degrees Sunday afternoon. Temperatures may not be quite so extreme this week, but they will still be in the 90s to well over 100 while little to no rain falls, resulting in an expansion of drought from South Dakota, Nebraska, Wyoming and Montana northward to parts of both North Dakota and Minnesota. The heat will shift to the east Monday and lose some of its intensity. However, extreme highs of 100 to 110 will continue today in the Dakotas and the range of 95 to 106 Tuesday through Thursday before cooling just slightly more Friday into Saturday. Heat soaring well into the 90s will spread into the upper Midwest today, before reaching the Great Lakes and the Northeast on Tuesday, along with increasing humidity.
U.S., Iran continue their military strikes… The U.S. and Iran exchanged fresh strikes over the weekend and into Monday as they continued their tit-for-tat attacks while issuing conflicting declarations over whether the Strait of Hormuz is open to shipping. U.S. Central Command said American forces carried out a new round of attacks to degrade Iran’s ability to threaten shipping in the narrow waterway, hitting dozens of targets including Iranian air-defense systems and missile capabilities. Tehran retaliated with attacks on U.S. allies in the Persian Gulf and beyond, targeting U.S. bases in Kuwait, Bahrain and Jordan. European and U.S. stocks fell as oil prices rose on the military action in the Middle East. A handful of ships have passed through the Strait of Hormuz in secret in recent days, even as observable crossings all but ceased after a flare-up in fighting between the US and Iran, according to Bloomberg. All of the six commodity carriers that transited Hormuz on Sunday did so with their transponders turned off, according to preliminary Kpler data analyzed by Bloomberg News.
Russia, Ukraine continuing to attack grain infrastructure… Russia and Ukraine attacked each others key grain export gateways over the weekend after shipping across the Sea of Azov was disrupted on Friday, triggering a spike in wheat prices. “Ukraine targeted four vessels with drones in Taganrog Bay in the Sea of Azov following a strike on the area on Friday that disrupted shipping through a key export corridor,” said a Bloomberg report. Russia temporarily halted shipping through the Don-Azov Channel, a waterway linking the Don River with the Sea of Azov, Reuters reported, citing sources in the grain export industry. It also closed the Kerch Strait, which connects the Sea of Azov and the Black Sea, from Friday evening, the newswire said. “In total, Ukraine struck 28 vessels of Russia’s fleet overnight in the Sea of Azov, including tankers and dry cargo ships, Robert Brovdi, a Ukrainian drone unit commander known as Madyar, said in a Telegram post. He also reported that 76 have been hit since July 6, a claim that couldn’t be independently verified,” said Bloomberg. Meantime, Russia over the weekend targeted port facilities in Odesa and Chornomorsk, in the Odesa region of Ukraine’s Black Sea coast, as well as sea vessels, the Russia’s Defense Ministry in Moscow said.
U.S. Senator Lindsey Graham dies… Lindsey Graham, the South Carolina senior senator, died on Saturday at the age of 71 due to aortic dissection due to arteriosclerotic cardiovascular disease. Graham was a strong ally of President Trump and had been working on initiatives to support Ukraine, including new sanctions on Russia. Tributes have been paid to Graham by Trump, Ukrainian President Volodymyr Zelenskyy, European Commission President Ursula von der Leyen, and others.
Fed Chair Warsh appears before Congress this week… Kevin Warsh is about to make his first appearance before Congress as Federal Reserve chairman, “and during two days of testimony he’ll have new U.S. inflation data to parse with lawmakers,” said a Bloomberg report. “Tuesday’s House Financial Services Committee hearing, which begins at Tuesday morning, will be preceded by June consumer price figures from the Bureau of Labor Statistics. Then on Wednesday, shortly after the BLS releases U.S. producer price data, Warsh will testify before a Senate committee,” said the report. Economists surveyed by Bloomberg expect both reports to show some relief following a surge in prices from March to May. “Markets currently imply 24% probability of a July hike — too low to think the Fed is realistically going to move then. For that to rise much would likely require both a hot CPI report and an overtly hawkish Fed chairman on Tuesday — both unlikely, in our opinion,” said Bloomberg Economics. CPI inflation is expected to slow below 4%, annually, in June from May’s three-year high of 4.2%, amid a slowdown in energy inflation. Core CPI is forecast to hold at 2.9%, on an annual basis, the highest since last September.
Malaysian palm oil futures rebound… Malaysian palm oil futures rebounded above MYR 4,500 per MT after recent sharp losses, supported by a weaker ringgit, stronger edible oils in Dalian and Chicago, and firmer crude oil as renewed Middle East tensions lifted sentiment. Exports also improved, with cargo surveyors noting July 1–10 shipments rose 1.6%–5.1% from the same period in June. In top producer Indonesia, a move to raise the biodiesel mandate to B50 from B40 is expected to spur palm oil consumption to 16.3–17.0 million tons this year from 15.2 million. Gains, however, were capped after the Malaysian Palm Oil Board said June inventories climbed 4.8% mom to a four-month top, while production grew 8.1% on seasonal output. Meanwhile, palm oil imports in India, the world’s largest consumer, fell to a 14-month low in June amid weak demand and a narrowing price advantage over rival oils. Traders also stayed cautious ahead of China’s June trade data and Q2 GDP, which could shape the demand outlook from another major buyer.
Cattle futures bulls working to right the ship, with little success… August live cattle on Friday fell $0.05 to $235.20, hit a 3.5-month low and for the week were down $3.90. August feeder cattle lost $1.55 to $354.60 and for the week were down $5.775. The cattle futures markets saw a pause amid mild technical selling pressure Friday, with technically bearish weekly low closes setting the stage for follow-through chart-based price pressure early this week. Solidly lower cash trade late last week may also pressure futures prices early this week. Cash cattle trading turned active as of midday Friday, with USDA reporting steers averaging $248.00 and heifers $247.96. That is well down from the week prior’s USDA-reported cash cattle trading average of $255.12.
Lean hog futures bulls remain in the driver’s seat… August lean hog futures on Friday rose $0.85 to $99.00, nearer the daily high and for the week up 25 cents. The lean hog futures market posted a decent rebound Friday after price pressure on Thursday. Bulls are keeping alive a price uptrend on the daily bar chart. The latest CME lean hog index is up 37 cents to $92.35. Today’s projected CME index price is up 34 cents at $92.69. The national direct five-day rolling average cash hog price quote for Friday was $96.92. Wholesale and cash hog fundamentals have turned supportive in tandem, led by BLT-season strength in bellies.