U.S. nonfarm payrolls unexpectedly fell by 23,000 in July and figures for the previous two months were weaker than originally estimated, the Labor Department reported Friday. Economists had looked for a rise of 80,000, according to a Bloomberg survey. The unemployment rate fell to 4.1% from 4.2%, but was the result of a smaller workforce, signaling more people stopped looking for work. While seasonal factors may have played a role, the data suggests the jobs market is weaker than thought. Stocks rose, Treasury yields retreated and the dollar fell Friday as investors scaled back expectations for a September rate hike by the Federal Reserve, though inflation data due in the week ahead will be crucial.
- “This is a bond-bullish report, and I cannot see the case for a Fed tightening in September or thereafter,” said economist David Rosenberg of Rosenberg Research, in a note. “Those 40% odds of a rate hike for September are soon to head to 0%,” he wrote, which means short-dated Treasury yields are due to fall faster than longer-dated yields. “That also means a weaker dollar and further improvement in the gold price, which is already in motion.”
Others argued that next week’s July consumer price index reading remains more important in determining the Fed’s path.
- “We agree that the July jobs report was a bit dovish on net. But we are sticking with our call that the Fed will hike by 75bp (basis points) this year, starting in September,” wrote strategists at BofA Global Research. “The Fed is likely to remain more focused on inflation than labor.”
Weekly market recap: Soybeans felt pressure in a weaker start to August, pressured by rains across much of the Midwest and forecasts for favorable weather well into the crucial month. A sharp retreat by crude oil futures on hopes for a deal to reopen the Strait of Hormuz also weighed on soy and grain markets. Cuts to European grain production estimates as a result of this summer’s heat wave and escalated fighting between Russia and Ukraine that threatens Black Sea exports helped underpin grain futures, while China continues to book soybean purchases. Traders are positioning for the Aug. 12 USDA Crop Production and WASDE reports. Cattle futures ran into heavy profit-taking pressure late in the week, threatening their recent rebound. Lean-hog futures remained under pressure amid continued weakness in the cash hog market.
- December corn closed unchanged at $4.62, down 2 cents for the week.
- November soybeans fell 1 1/2 cents to $11.76 1/4, suffering a weekly fall of 11 1/4 cents. September soybean meal lost $2.70 to $308.90 and hit a four-week low. For the week, September meal was down $6.00. September bean oil rose 50 points to 68.24 cents, posting a weekly gain of 98 points.
- September soft red winter wheat rose 8 1/2 cents to $6.39 3/4, eking out a ½-cent gain for the week. September hard red winter wheat gained 14 1/4 cents to $7.14, for a weekly gain of 6 1/2 cents. September spring wheat futures rose 8 1/2 cents to $6.79 1/2, but lost 10 1/4 cents for the week.
- December cotton futures rose 124 points to 84.40 cents, hitting a nearly three-month high and logging a weekly gain of 261 points.
- October live cattle futures rose $0.35 to $225.275, down $1.975 for the week. September feeder cattle futures rose $3.65 to $345.225, for a weekly rise of $3.125.
- October lean hog futures rose $0.50 to $82.225, after hitting a four-week low early on. For the week, October hogs were down $2.625.
No break on borrowing costs: The latest Farm Journal Ag Economists’ Monthly Monitor released Friday found respondents expect borrowing costs and input prices to remain elevated or perhaps rise further heading into 2027. Sixty-nine percent of economists surveyed said they expect the average ag interest rate to rise slightly in 2027 from 2026, while the same percentage see input costs flat or rising. Read: No Input or Interest Rate Relief in Sight as Ag Economists Flag Rising Farm Debt Stress
Potentially worst U.K. harvest on record: The U.K. grain harvest is shaping up to be the worst since comparable records began in 1984, according to an analysis published this week, reflecting the toll of a brutal heatwave that has withered crops across western Europe. The Energy and Climate Intelligence Unit said the extreme conditions may have knocked up to 2.5 million metric tons off Britain’s cereal and oilseed harvest compared to earlier forecasts, Reuters reported. If early average yields hold, the U.K. cereal and oilseeds harvest would be 19.5 million tons, surpassing 2020 as the worst since detailed records began 42 years ago, the report said.
Diesel prices disrupt palm oil harvest: Palm oil harvests on the Southeast Asia islands of Borneo and Sumatra face disruption due to rising fuel prices and shortages, which have forced smallholders to cut back on fruit collection, Reuters reported, observing that the situation poses a threat to yields of the world’s most widely used edible oil. The report said longer disruptions could curb output by top producers Indonesia and Malaysia with the El Nino weather pattern expected to cut rain and weigh on yields after a rise of more than 15% for Malaysian benchmark palm oil futures in the year to date.