Good morning!
Grain futures firmer overnight; wheat leads… At 6:00 a.m. CDT, December corn was up 1 cent. November soybeans were 3 1/4 cents higher and near the recent contract high. December soybean meal was up $2.10. December bean oil was 20 points higher. December SRW and HRW wheat were both around 7 cents higher. The wheat markets are holding the other grain markets up so far this week, as the Russia-Ukraine war shows no signs of letting up, including each side hitting the other’s shipping infrastructure. (See item below.) The data point of the week for the grain markets is Friday’s USDA monthly supply and demand report. The key outside markets today see the U.S. dollar index slightly up. October Nymex WTI crude oil prices are higher, hit a three-month high and are trading around $95.50 a barrel. The yield on the benchmark 10-year U.S. Treasury yield is presently 4.81%.
U.S., Iran ramp up military strikes in Persian Gulf… The U.S. attacked more Iranian oil tankers overnight, with the worsening tensions over control of the Strait of Hormuz sending Brent crude beyond $100 a barrel. “The American military said it destroyed five vessels in response to Iran’s Islamic Revolutionary Guard Corps targeting one of its warships,” said a Bloomberg report. The American vessel “successfully evaded the attempted Iranian attacks,” Central Command, which oversees U.S. forces in the Middle East, said. “No American personnel were harmed.” Centcom said it hit four tankers in the Gulf of Oman and one near Kharg Island, which sits within the Persian Gulf and is Iran’s main oil-export terminal. “American forces directed the crews to abandon ship before the vessels were struck and rendered inoperable,” Centcom said, without clarifying if the ships were carrying oil or were empty. The U.S. has destroyed at least eight oil tankers since Saturday. It’s unclear what proportion of Iran’s energy fleet that represents. Meantime, Iranian media said Tehran retaliated by targeting two other U.S. warships and eight oil tankers in the Persian Gulf. There was no immediate confirmation of those attacks or any reports of damage. Iran also fired ballistic missiles at Al-Azraq Air Base in Jordan. The Arab country’s government said it intercepted 18 missiles and another two fell in uninhabited areas. Brent crude oil rose 2.5% to above $100 a barrel today. That extended its rise to 65% for the year.
Ukraine strikes major Russian Black Sea port… Russia’s biggest Black Sea port of Novorossiysk and the surrounding areas were attacked by drones overnight, “damaging infrastructure and threatening to further squeeze commodity flows from the region,” said a Bloomberg report. “Last night, our military repelled a massive enemy drone attack on the region,” Novorossiysk city mayor Andrey Kravchenko said in a Telegram statement. “The main strike targeted Novorossiysk,” with civil infrastructure damaged, he said, providing no information on whether any port facilities were affected. Novorossiysk, which hosts grain, crude and oil product terminals, is on fire, according to NASA’s Fire Information for Resource Management System. The satellite imagery taken today shows relatively fresh heat anomalies — likely indicating fires — in the area where some grain facilities and the fuel oil terminal are located. The Black Sea terminal of the Caspian Pipeline Consortium, the main outlet for Kazakshtan’s crude-oil exports, was also targeted by drones on Wednesday morning, according to a person familiar with the matter, said the Bloomberg report.
More showers/thunderstorms in eastern half of U.S.; heat wave in southern U.S. breaks … The National Weather Service today said a cyclone in southern Canada will sweep a cold front through the northern-tier states over the next couple of days. Areas of heavy rain and severe weather threats near and ahead of the front will spread from the Midwest and the lower Great Lakes this morning to interior New England by tonight. As the frontal system pushes against the persistent heat dome across the South, expect a stretch of showers and thunderstorms from the central Plains through the mid-Atlantic over the next couple of days. Locally heavy rain is possible across the Mid-Mississippi Valley today, followed by the central Appalachians on Thursday. This front will also break the unrelenting heat wave across the south-central U.S. by Thursday, bringing clouds, occasional rain, and some embedded thunderstorms.
“Diesel Crunch Threatens Lasting Price Pain, Consumption Cutbacks: … That’s a Bloomberg headline overnight. “The global refining sector’s diesel crunch is likely to result in tight supply for the coming months, keeping prices high and weighing on demand. Fuel exports lost from the major processing hubs in the Middle East and Russia now amount to 2 million barrels a day each, with consumers turning to distillate fuel stockpiles. The global refining system may struggle to sustain itself until the end of the year, creating the risk of ‘a huge shortage’ in fuels, particularly in Northwest Europe during the winter,” said the report. The impact of Ukrainian drone strikes on Russian refineries as prompted the country to extend a ban on diesel exports.
U.S. retaliates to Canada’s trade retaliation… The U.S. escalated its trade war with Canada following Ottawa’s tariff retaliation, Bloomberg reports, “moving to block imports of some products while slapping new tariffs on others, as well as seeking to bar Canadian companies from selling to government contractors.” The measures announced by the Trump administration in a series of proclamations on Tuesday include bans on whey proteins, certain rye whiskies and other liquors, malt beer and certain grape wines, non-alcoholic beer and motorcycles. President Trump had earlier hinted at the move in response to bans on U.S. alcohol products by several Canadian provinces. Trump also expanded the Section 338 tariffs — a power dating back to a Depression-era Smoot-Hawley tariff law that was first tested in August — by extending them to certain cheeses, animal hides, motorboats, certain aluminum and paper products, golf carts and mattresses. The import bans for some Canadian dairy products and alcohol will take effect in three weeks, a senior administration official told reporters.
U.S. dollar slumps as yen rallies, ahead of key U.S. inflation data Thursday, Friday… The U.S. dollar neared its lowest level in nearly seven months as the Japanese yen rallied at mid-week, with traders looking ahead to the U.S. Treasury’s buyback announcement and inflation data later this week. The Bloomberg Dollar Spot Index was down as much as 0.2% today, approaching its weakest since Feb. 18. The drop was led by gains on the yen, the second-biggest component of the gauge. The Japanese currency advanced 0.5%, extending this month’s gain to about 4%, said Bloomberg. “The greenback came under renewed pressure after U.S. Treasury Secretary Scott Bessent challenged traders to test his resolve on strengthening the yen, saying when he makes market calls these days he’s effectively doing so with inside information. The comments were among Bessent’s most strident yet in an extraordinary campaign to bend markets to his will,” said the report. Bessent is also set to reveal how far he’s initially willing to go to restrain U.S. bond yields through an expanded buyback program. The Treasury Department is expected to announce later today the size of Thursday’s operation to repurchase outstanding 10- to 20-year securities. Traders are also focused on Thursday’s and Friday’s US inflation data—the producer price index on Thursday and consumer price index on Friday. Money markets are presently assigning about a 60% probability that the Federal Reserve will raise U.S. interest rates by a quarter point at next week’s FOMC meeting.
China inflation up-ticks… China’s annual inflation climbed to 0.8% in August 2026 from July’s six-month low of 0.5%, in line with market estimates. Non-food prices rose at a steeper rate (1.2% vs 0.9% in July), led by a sharp increase in transport costs (2.5% vs 0.4%) amid higher fuel prices and stronger travel-related demand. Upward price pressure also came from clothing (1.3% vs 1.4%), healthcare (2.7% vs 2.9%), and education (1.4% vs 1.3%). In contrast, housing costs remained subdued (-0.3% vs -0.3%). On the food side, prices declined for the fifth straight month (-1.4% vs -1.5%), weighed by a further drop in pork prices amid abundant supply and weak consumption. Core inflation, excluding food and energy, rose 1.0%, year-on-year, up from July’s six-month low of 0.9% On a monthly basis, consumer prices increased 0.4%, topping forecasts of a 0.3% gain and reversing a 0.1% drop in July. It also marked the highest monthly reading since February.
Malaysian palm oil futures weaker… Malaysian palm oil futures remained subdued Wednesday, trading near MYR 4,960 per MT, pressured by a stronger ringgit and weaker edible oil prices in the Dalian and Chicago markets. Meanwhile, exports remained sluggish, with cargo surveyors estimating August palm oil shipments fell between 6.5% and 14.9% from July, while inventories climbed to a five-month high in July. In India, heavy vegetable-oil buying congested major ports, delaying vessel unloading by up to 10 days as storage tanks overflow, potentially dampening near-term import demand. In top supplier Indonesia, new technical regulations tightened central government control over key export commodities, including palm oil, under President Prabowo Subianto’s plan to boost state earnings from natural resources. Still, losses were cushioned by firmer crude oil amid renewed Middle East tensions. Meanwhile, unusually dry conditions across Southeast Asia raised concerns over yields after triggering fires and haze in Borneo and Sumatra.
Cattle futures post strong rallies… October live cattle on Tuesday rose $4.075 to $217.025 and hit a two-week high. November feeder cattle gained $5.725 to $320.45 and hit a three-week high. The cattle futures markets saw more solid short covering and perceived bargain buying by the speculators. The Trump administration’s move to get smaller U.S. beef processors ramped up appears to have also given a psychological boost to cattle futures. October live cattle futures continue to trade at a discount to the cash cattle market, which is also supportive for futures. USDA at midday Tuesday reported cash cattle trading last week averaged $219.06. The agency said cash cattle trade the week prior averaged $219.25.
Lean hog futures gain on short covering, bargain hunting… October lean hogs on Tuesday rose $1.95 to $84.25. The hog futures market saw good short covering and perceived bargain buying. Gains in cattle futures also spilled over into better buying interest in hog futures. The latest CME lean hog index is down 54 cents to $90.54 as of Sept. 3. Today’s projected CME index price is down another 89 cents at $89.65. The national direct five-day rolling average cash hog price quote for Tuesday was $89.35.