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It was a pretty ugly Monday across the ag complex. A heatwave did no favors for corn or soy complex futures as traders appeared to set their sights on more favorable longer term forecasts and proceeded to book some profits. Grain and oilseed futures overall appeared to take their biggest cue from a steep selloff in crude, as a continued pause in hostilities between the U.S. and Iran stoked hopes the intensity of the conflict is beginning to ebb
And then there’s the cattle market. Despite USDA waiting until Friday evening to announce its plan to begin a phased reopening of the southern border to Mexican cattle imports on Aug. 24, there was no hiding from the bears. Live cattle futures ended lower but it was feeder cattle that, as would be expected, took it the hardest.
August feeder cattle lost $7.075 to $338.25 for the lowest close in seven months. And befitting the phased-in nature of the reopening, deferred contracts faced the most pressure, with October through May feeder contracts down the daily trading limit of $10.75, which means expanded limits will be in place Tuesday.
But beyond the kneejerk reaction, there’s a case to be made that the longer term implications of the end of the export ban, which traders have known would one day come, are relatively benign.
- “The flow of Mexican cattle will be very small for many weeks with a relatively small number of cattle likely to be imported in the remainder of the year,” said Oklahoma State University livestock extension specialist Derrell Peel, in the weekly Cow-Calf Corner newsletter.
Peel argued that the market impact beyond the initial futures reaction should be “minimal. He wrote: “It is uncertain if a return to historic levels of Mexican cattle imports will happen, but if it does, it will likely take many months.”
Listen: Pro Farmer Podcast: Reopening the border
Condition update: Weekly crop progress data released by USDA after Monday’s closing bell showed corn and soybeans deteriorated more than expected last week. The question is whether that will be enough to reinvigorate the bulls.
- USDA said 63% of the corn crop was rated “good” or “excellent” as of Sunday, down from 67% a week ago and two percentage points below the average trade guess of 65% in a Bloomberg survey of analysts. Last year at this time the crop was rated 73% good to excellent. The Pro Farmer Crop Conditions Index (on a 0-to-500 scale, 500 equals perfect) saw a 8.25 point decline to 364.39. A majority of states saw declines, though the mid-South states of Missouri, Tennessee, and North Carolina saw minor gains of less than half a point each.
- USDA also pegged 63% of the soybean crop in the good or excellent categories, down from 66% last week and also two percentage points below the average guess. Soybeans were rated 70% good to excellent last year. The CCI rating dropped 5.23 points from last week as well to 365.09. Rating changes in soybeans mirrored those in corn, with states in the Midwest and northern Plains facing deteriorations while those in the Southeast were steady to slightly higher.
- The spring wheat crop’s overall rating appeared to defy hot, dry weather in the northern Plains, with 53% of the crop rated good to excellent, unchanged from last week and two percentage points above the average guess. That said, a decline in fair ratings and an increase in the poor to very poor categories led to the Pro Farmer CCI dropping 7.01 points to 344.38. Dryness in the Dakotas was the main driver of change this week, with both states notching declines that offset gains elsewhere. For more details on this week’s Pro Farmer CCI ratings, click here.
China’s “all necessary measures” warning: Some of the pain in soybeans, despite another flash export sale to China, was attributed to Beijing’s warnings over potential retaliation should the U.S. follow through on sanctioning Chinese artificial intelligence companies. China’s Ministry of Commerce on Monday described the Trump administration’s accusations that Chinese firms stole U.S. intellectual property by improperly using American models to train their systems as a “smear campaign” and hit back at threatened sanctions, Bloomberg reported.
- “China will take all necessary measures to firmly safeguard its legitimate rights and interests against any actions that substantially harm China’s interests,” the ministry said in a statement.
Some important U.S.-China tariff nuance: A Ministry of Commerce spokesperson on Monday also criticized the U.S. imposition of tariffs on Chinese goods late last week – part of the sweeping Section 301 tariff moves that imposed duties on 60 economies as part of what the Trump administration has described as a crackdown on “forced labor.” Strikingly, however, the ministry also said the U.S. had committed to cap replacement tariffs on Chinese goods at 20%, noting that the new levies – which replace the sweeping tariffs struck down by the Supreme Court earlier this year – have a rate of 12.5%. By doing so, “Beijing appeared to signal that the U.S. has 7.5 percentage points of room for additional increases before reaching the stated ceiling,” Bloomberg wrote.
“China is willing to continue dialogue and consultation with the U.S. on the basis of mutual respect, equality, and mutual benefit, in order to address each other’s concerns,” a commerce ministry spokesperson said, according to the Global Times, a state-run tabloid.
‘Good chance’ of U.S.-Iran deal: President Donald Trump told reporters aboard Air Force One on Monday that there was a prospect for renewed diplomacy to bring an end to the renewed fighting that had last week driven Brent crude back above $100 a barrel for the first time since May.
“I have a lot of patience…We’ll see what happens,” Trump said, according to AFP. “I think there is a good chance something could happen.” Tehran had earlier denied there were any talks under way to end the conflict.
Oil futures have fallen back sharply since the U.S. and Iran paused the recent fighting, despite traffic through the Strait of Hormuz remaining at a near standstill and threats from Iran-backed Houthi rebels against Saudi ships in the Red Sea. U.S. benchmark West Texas Intermediate crude dropped 7.5% Monday to close at $82.61, while Brent shed 8.7% to $88.36 a barrel.
Don’t miss: Market Analyst Hillari Mason connects with Pro Farmer members to gather updates on crop conditions and emerging trends across the Corn Belt. Read it here.
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