Written Commentary
SOYBEANS
US weather continues to be the major bearish force pressuring the bean market as July beans took out the May lows overnight, further weakening the technical outlook. All of the Bean Belt is expecting precipitation over the next week, except for the far northern Plains. Temperatures are forecast to remain normal to mostly below normal across the Midwest. Furthermore, the US/China negotiation framework is in jeopardy as both sides are blaming each other for breaking the agreement.
SOYBEAN MEAL
Both meal and bean oil are starting the week with a weaker tone as bearish US weather forecasts pressure the soy complex. July meal prices were unable to attract much buying last week after moving to a new monthly high on May 22 and are pulling back. However, as the market drops, consumptive buying interest increases. Last week’s weekly export sales reading came in at the top end of the range of forecasts, and lower prices will only enhance US competitiveness.
CORN
The market is starting out with some light support from a stronger wheat market and a weaker US dollar this morning. However, there is no bullish story at the current time, with good US weather and a lack of any completed trade agreements capping rallies. This week, rain will favor Oklahoma, central Nebraska, Missouri, and northern Illinois, but most of the Midwest will see some precipitation except for the Dakotas. A below-normal temperature trend will continue for the next 2 weeks, and crop development will be slow.
WHEAT
The wheat markets are starting the week on the upside due to the weaker dollar and the forecast for unwanted precipitation in parts of the HRW regions this week. Heavy rains are expected in parts of the southern Plains this week, where conditions have been exceptionally wet recently, raising concerns about disease pressure and slowing early harvest efforts in the far southern areas. Adding further support, Ukraine completed a major attack on Russian air assets over the weekend, knocking out numerous strategic bombers and other aircraft at airfields across Russia. Ironically, the attack comes just ahead of this week’s peace talks in Istanbul, but expectations are low for any breakthrough.
CATTLE
Live cattle and feeder market action Friday was disappointing, with a strong opening and a weak close. The futures discount to cash remains historically large, but is also a warning sign to the bulls that cash prices may be too hot. Slaughter this week is expected to rebound closer to normal after a very small slaughter last week. COT data showed only a very minor decrease in the fund net long position in live cattle and feeders, leaving the risk of long liquidation intact.
HOGS
The hog market closed very strong at the end of last week, and July prices hit a three-month high. Last week’s weekly slaughter fell below expectations. Brazil’s bird flu problem has shut down the world’s largest poultry exporter, potentially allowing the US to gain market share in poultry exports, which could drive chicken prices higher and pull pork prices along for the ride.
MILK CLASS III
July Class III milk finished with a modest weekly loss after reaching a new contract high on Wednesday.
The USDA reported that milk production has been steady to lighter across the nation, but the decrease has not affected manufacturing. Class I demand is slowing, with bottling production winding down as summer break begins at educational institutions.
ENERGIES
July Crude Oil gapped higher overnight and came close to testing the May 21 high. OPEC+ agreed to another 411,000 million barrel per day increase in production for July as expected, but there were some hints of a stronger increase on Friday, so part of the rally may be been from relief that the increase was not larger. The Baker Hughes rig count showed US oil rigs in operation were down 4 rigs to 461 last week. This was down from 496 rigs a year ago and the lowest since November 2021, which is another indication that low prices sparker lower production. Surprise Ukrainian drone attacks on several Russian targets on Sunday in to places as distant as eastern Siberia and the border with Norway may have also increased market anxiety. Russia also stepped up its bombing campaign against Ukraine.
The product markets are sharply higher this morning, in step with the increase in crude oil prices.
July Natural Gas gapped higher overnight, recouping some of its losses from last week. The Baker Hughes rig count showed US natural gas rigs in operation were up 1 rig to 99 last week. This was down from 100 rigs a year ago and below the five-year average of 112. Total rigs in operation fell to 563 from 566 last week and 600 a year ago. The drop in oil & gas rigs last week could mean lower US natural gas production. The 6-10 and 8-14 day forecasts have normal and below normal temps centered on the US Midwest and above normal elsewhere in the lower 48 states. So far, no big heat dome has emerged to spark an extended spell of cooling demand, but some hot weather is expected in the western US that could keep electricity demand running at a seasonal pace overall.
DOLLAR INDEX
The USD index is lower as markets assess renewed trade-war fears, with rising inflation and slowing economic growth in focus. June contracts erased all their gains from last week in overnight trade. This week will provide various economic releases, likely impacting price swings in the dollar. Labor market data and trade news will likely be the main drivers of price action in the dollar this week.
COCOA
The cocoa market was higher on Friday and again overnight after the ICCO tightened it supply estimates for 2023/24 in a quarterly update on Friday. In the report, world 2024/25 cocoa production was revised down to 4.368 million metric tons from 4.489 million in the first quarter update. Grindings were revised to 4.818 million from 4.885 million previously, putting the global deficit at 494,000 tons, up from 441,000 previously. The result was a 66,000-ton decline in 2023/24 global ending stocks to 1.270 million tons from 1.336 million previously. ICCO provided no updates for 2024/25, but the lower ending stocks does imply a similar, 66,000-ton decline in ending stocks for 2024/25 from the first quarter forecast. Ivory Coast 2024/25 production was left unchanged, but Ghana’s was lowered to 449,000 tons from 530,000 previously, with Ecuador’s lowered to 419,000 from 430,000 and Brazil’s to 182,200 tons from 200,000.
COFFEE
July Coffee extended its recent selloff overnight and fell to its lowest level since April 9, the day it put in a spike bottom. The market has been moving steadily lower since putting in a contract high April 29. Brazil’s robusta harvest is advancing, and growers are reporting strong yields. A drop in Vietnam cash prices last week was attributed to pressure for Brazil and Indonesia. This ample supply in most evident in the July London robusta futures, which have fallen to their lowest level since December, and they seem to be leading the NY market lower. Safras & Mercado said today that Brazil’s 2025/26 coffee harvest was 20% complete as of May 28, down from 22% a year earlier, but that would include arabica as well.
COTTON
Cotton market received support from the demand side of the market on Friday after Gap Inc. reported that it plans to double it use of US-grown cotton by 2026, and this may have fed a short-covering rally overnight. Friday’s export sales report was hardly bullish, as total sales were down from the previous week’s already low number, but at least new-crop sales recovered to 13,822 bales from the dismal 7,392 bales the previous week. Cumulative sales for 2025/26 have reached 1.298 million bales, which is the slowest start for new crop sales in at least 12 years.
SUGAR
July Sugar is higher this morning, perhaps on the stalling of the Indian monsoon after its early arrival last week. There have also been reports that buyers in China reemerged on the recent price weakness. The global weather pattern looks a bit less bearish than it did last week. Rainfall in India is expected to be subdued for a few days, but the monsoon expected to strengthen around June 11 or 12 and start covering the remaining parts of the country. World Weather Service said Drier conditions are emerging in northwestern and central Sumatra, Indonesia and are expected to continue to do so over the next ten days and that the sugarcane could become stressed as dryness becomes more significant later in June. Brazil sugarcane areas will trend cooler periodically in the next ten days to two weeks, but there will be no risk of crop damaging cold. Last week’s UNICA report showed a smaller decline from a year ago than expected in Brazil’s Center South sugar production during the first half of May, with production at 2.408 million metric tons versus expectations of 2.2 million.
PRECIOUS METALS
Gold futures are sharply higher, with June contracts rising over two percent as investors seek safe-haven demand following the recent trade spat between the US and China. Both countries accused each other of undermining the 90-day truce they agreed to in Geneva. President Trump said on Friday he will double existing tariffs on steel and aluminum imports from 25% to 50%, effective June 4, as a legal battle continues in court as to the legality of the implementation of the tariffs. Dollar weakness also strengthened gold’s upside.
Silver futures are higher in overnight trade, benefiting from a weaker dollar and safe-haven demand as spot prices neared two-month highs.
July copper futures jumped nearly five percent, widening their premium over LME contracts, as rising speculation over a possible tariff on the metal comes as President Trump announced 50% tariffs on aluminum and steel. In February, President Trump ordered a probe into possible new tariffs on copper imports to rebuild US production of a metal critical to electric vehicles, military hardware, and semiconductors.
EQUITIES
Stock index futures are lower after President Trump announced he will be doubling the tariffs on steel and aluminum to 50% on June 4th. Beijing said the US had “seriously undermined” the 90-day truce between the two countries. Treasury Secretary Scott Bessent said he is confident that President Trump and Party Chairman Xi Jingping would hold talks sometime this week.
INTEREST RATES
Futures are lower across the curve, with longer-date yields down the most as investors pull out of US assets following renewed trade war fears between the US and China. Investors worry that a trade war with China will result in higher inflation and slower economic growth. Recent trade policies, combined with the fiscal picture of the US debt, have caused investors to demand higher yields on bonds, as they question the confidence of US debt. Most of the selling in the bond market recently has been at the long end of the curve, driven by concerns of long-term inflation resulting from President Trump’s tariffs and tax cuts.
Risk Warning: Investments in Equities, Contracts for Difference (CFDs) in any instrument, Futures, Options, Derivatives and Foreign Exchange can fluctuate in value. Investors should therefore be aware that they may not realise the initial amount invested and may incur additional liabilities. These investments may be subject to above average financial risk of loss. Investors should consider their financial circumstances, investment experience and if it is appropriate to invest. If necessary, seek independent financial advice.
ADM Investor Services International Limited, registered in England No. 2547805, is authorised and regulated by the Financial Conduct Authority [FRN 148474] and is a member of the London Stock Exchange. Registered office: 3rd Floor, The Minster Building, 21 Mincing Lane, London EC3R 7AG.
A subsidiary of Archer Daniels Midland Company.
© 2021 ADM Investor Services International Limited.
Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM. The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.
