Note: Markets and government offices will be closed Friday for the Juneteenth federal holiday. As a result, there will be no Pro Farmer updates.
Good morning!
Grain futures mixed-weaker overnight… At 6:00 a.m. CDT, July corn was down 2 1/4 cents. July soybeans were off 7 3/4 cents. July soybean meal was down $1.60. July bean oil was 101 points down. July SRW wheat was up 1/2 cent and hit a three-week high. July HRW was 2 cents higher and also hit a three-week high. The winter wheat market bulls have come back to life late this holiday-shortened week. More price gains in wheat would likely work to release the languishing corn and soybean futures markets from their bearish shackles. On tap today is the weekly USDA export sales report, as well as the monthly USDA cattle-on-feed report. The key outside markets today see the U.S. dollar index solidly higher and hitting a 2.5-month high, while Nymex WTI crude oil prices are lower, hit a three-month low overnight and are trading around $75.50 a barrel. The yield on the benchmark 10-year U.S. Treasury yield is presently 4.45%.
U.S.-Iran sign initial peace deal… President Trump and Iran’s Masoud Pezeshkian signed an initial deal to end the Middle East war. As part of the 14-point memo, further talks to reach a final agreement will take place over the next 60 days, during which the Strait of Hormuz reopens. Ships are already starting to sail through the Strait. Also included in the deal is a $300 billion plan for Iran’s “reconstruction” but key questions around its nuclear program remain. An official signing ceremony, with U.S. and Iranian representatives, had been scheduled to take place in Switzerland on Friday but now it’s not clear if this will still happen. Trump signed the so-called memorandum of understanding at the Palace of Versailles near Paris on Wednesday evening, at the end of a Group of Seven summit. He was flanked by world and business leaders, including French President Emmanuel Macron. “Oil down,” Trump immediately said.
New World screwworm cases detected in U.S. still at 12… The USDA Animal and Plant Health and Inspection Service (APHIS) on its NWS website is still reporting 12 total New World screwworm detected cases, in Texas and New Mexico. Meantime, the International Atomic Energy Agency, a key global nuclear lab institution, is helping to eradicate NWS, saying more sterile flies and better coordination with southern neighbors is needed to prevent the deadly parasite from spreading across North America. The Vienna-based IAEA today said it is coordinating a new project to create more sterile flies and stem the outbreak threatening billions of dollars in damages for ranchers in the US. The coordinated research project aims to improve tools for detecting and combating the parasitic fly and comes as growing cases in Texas and New Mexico add urgency to containment efforts. “The agency was part of efforts over four decades to drive the pest out of North America, introducing sterile-insect techniques,” said a Bloomberg report. This time around, countries aren’t currently producing enough sterile flies to suppress the pest, according to Rui Cardoso Pereira, who heads the IAEA’s Austrian laboratory that deals with screwworm outbreaks.
Severe heat in Texas; calmer weather in central U.S. today … The National Weather Service today said most of the Plains and Midwest states will see calmer conditions and near-normal temperatures today. However, intense heat will be prevalent across much of Texas today, with heat advisories extending north to the Texas/Oklahoma border, and extreme heat warnings across south-central Texas where combinations of 95-105 degree temperatures combined with high dewpoints will lead to heat indices exceeding 110 degrees in many cases. There should be some abatement in the heatwave going into Friday.
FOMC leans surprisingly hawkish on U.S. monetary policy… “Traders piled into betting on interest-rate hikes as soon as next month after Kevin Warsh used his debut press conference as Federal Reserve chairman to make clear the central bank won’t tolerate high inflation,” said a Bloomberg report. U.S. Treasury yields rose after the FOMC meeting and Warsh’s press conference Wednesday afternoon. “The hawkish message was driven home by the projections of individual Fed members, half of whom expect to raise rates by the end of the year. Before Wednesday’s FOMC conclusion, Wall Street had largely assumed the Fed was done cutting U.S. interest rates amid the U.S.- Iran war’s oil shock that sent consumer prices surging by the most in three years. “But investors also wondered whether Warsh would give in to President Trump, who elevated him to the central bank post after repeatedly lashing out at his predecessor, Jerome Powell, for not slashing borrowing costs enough. Both questions appeared to be settled — at least for now — after Warsh spoke Wednesday,” said the Bloomberg report.
Average U.S. gasoline price now below $4 a gallon… U.S. gasoline prices have dipped below $4 a gallon for the first time since March, providing welcome relief to consumers. The swing down in prices comes as the U.S. and Iran signed an interim deal to end the war and reopen the Strait of Hormuz, and due to a decline in global crude prices. Prices are still well above where they stood before the war and aren’t expected to return to those levels until next year, experts say.
India monsoons start out very weak, threatening crops… India’s monsoon has had an unusually weak start and the lackluster rainfall is likely to persist, threatening crops and industrial activity as the El Niño weather phenomenon takes hold, said Bloomberg in a report. “Nationwide monsoon rainfall was nearly 40% below normal as of Wednesday, according to the latest data from the India Meteorological Department. The season runs from June through September and is responsible for the bulk of the country’s annual rainfall. The poor start is hampering the growing season for staples from rice to soybeans, as well as disrupting key sectors like construction.” Monsoonal rains that sweep across India are crucial for the country’s agriculture and energy industries. “The country is one of the world’s largest producers of rice, sugar and cotton, and farmers depend on the seasonal deluges to irrigate their fields. Poor harvests raise the risk that authorities could impose export restrictions,” said the report.
USDA moving most of its FAS out of Washington, D.C. … USDA Wednesday announced a reorganization of the Foreign Agricultural Service (FAS) “to streamline operations, consolidate support functions, and bring employees and programs closer to America’s agricultural heartland,” according to a press release. “FAS will establish an operational support hub in Kansas City, Missouri, and will begin a phased relocation of much of its Washington, D.C.-based workforce to this new duty station and to USDA’s George Washington Carver Center in Beltsville, Maryland, while a smaller Washington-based contingent will remain in Washington, D.C… . This modernization effort does not include any reduction in force and focuses entirely on domestic headquarters functions; no overseas staff or diplomatic posts are affected,” said the USDA press release.
Malaysian palm oil futures lower… Malaysian palm oil futures fell below MYR 4,500 per MT Thursday, reversing the previous strong rally, as trading resumed after a holiday Wednesday. Sentiment was pressured by weaker edible oil prices on the Dalian and Chicago markets. A sharp decline in crude oil prices added to the downside after the U.S. and Iran signed an interim agreement aimed at ending hostilities and reopening the Strait of Hormuz, reducing support from the biofuel sector. Meanwhile, Malaysia lowered its July crude palm oil reference price, keeping the export duty unchanged at 10%. Still, losses were limited by a weaker ringgit and expectations of lower production due to the lingering effects of El Niño. Demand prospects also remained supportive after cargo surveyors reported that palm oil exports during June 1–15 rose between 9.6% and 23.8% from the same period in May. In top buyer India, imports are expected to exceed 600,000 MT in June after edging up to 549,356 MT in May, according to local traders.
Cattle futures markets pause ahead of today’s COF data… August live cattle on Wednesday fell $0.35 to $248.85and hit a four-week high early on. August feeder cattle rose $0.55 to $367.425. The live cattle futures markets saw a mild downside correction and feeders a pause, following recent good gains. At present, the New World screwworm situation is still viewed as fully bullish for cattle futures. The USDA Animal and Plant Health and Inspection Service (APHIS) on its NWS website is still reporting 12 total New World screwworm detected cases, in Texas and New Mexico. USDA so far this week has reported very light cash cattle trading, averaging $254.00. The agency said cash trade last week averaged $256.08, down 45 cents from the week prior. Cattle futures traders are looking forward to this afternoon’s monthly USDA cattle-on-feed report, out one day earlier than usual due to the federal holiday on Friday, when markets are closed.
Short covering in lean hog futures… August lean hog futures on Wednesday rose $1.45 to $96.50. The hog futures market saw short covering. The near-term technicals remain firmly bearish amid a price downtrend in place on the daily bar chart. The market is still due for more of an upside corrective bounce. The latest CME lean hog index is down 16 cents at $91.93. Today’s projected cash index price is up 49 cents $92.43. The national direct five-day rolling average cash hog price quote Wednesday was $96.69.