Written Commentary
SOYBEANS
Following yesterday’s USDA report, which featured slightly higher bean stocks than expected and slightly lower acreage, prices this morning are weakening as favorable US weather overrides all other news. The acreage change from March to June was the smallest in 4 years. The USDA reduced harvested acres by 165,000 and estimated 11.5 million bean acres left to plant, which is not unusual for this time of year and less than the 12.77 million left at this time last year. Planted area for all oilseeds is down nearly 4 million acres from a year ago. The USDA will release prevent plant data in August.
SOYBEAN MEAL
The soy complex has been unable to sustain any upside momentum so far this week, especially soymeal, which hit a new contract low today. Yesterday’s USDA quarterly stocks and acreage report did not hold any major surprises for the bean complex, and the market focus has quickly returned to favorable US weather, solid crop conditions, and concerns regarding Chinese demand. The report indicated that crushers are likely holding larger bean supplies than last year, in anticipation of the large meal export sales book.
CORN
Weak trading action continues this morning as yesterday’s USDA numbers are in the rearview mirror and favorable pollination weather is ahead. The report yesterday featured a neutral stocks number, essentially right on the pre-report guesses, and a slightly lower acreage number than expected. In addition, the USDA reduced harvested acres by 600,000 from the Supply/Demand report earlier this month, which may indicate that prevent plant data in August will be important to monitor, as some areas were very wet at planting time. USDA estimated 3.6 million acres left to plant, in line with the average this time of year.
WHEAT
Wheat is finding some support this morning, thanks to the extension of the downside in the US dollar and a couple of global tenders from Jordan and Bangladesh. The USDA quarterly stocks were bearish yesterday, coming in at the high end of the guesses, and acreage was neutral. Harvested acres were lowered by 550,000, which, if carried through to the supply and demand balance sheet, would suggest a roughly 20 million bushel drop in ending stocks.
CATTLE
Cattle prices are expected to start weaker this morning after the USDA announced overnight a phased reopening of the Mexican border to cattle imports, starting on July 7 at the Douglas, Arizona border crossing. Ports in New Mexico and Texas will reopen over the next couple of months as the USDA evaluates conditions. This is likely to result in speculative selling in the cattle market this morning, especially feeders.
HOGS
The hog market closed sharply weaker on Monday, and seemed to “give up the ghost” yesterday after rebounding on Friday to close in the upper end of the range. August hogs hit a 3-week low yesterday, and a correction of the long uptrend since early April is ongoing. The Cash Hog Index was lower yesterday for the first time since May 9. Managed Money was holding a record high net long position as of Tuesday of last week, and those longs are certainly feeling the heat. Further fund long liquidation may accelerate the current downside correction.
MILK CLASS III
August Class III milk finished with a moderate weekly gain after falling to a new contract low on Wednesday, which broke a 4-week losing streak.
The USDA reported that rising temperatures contributed to a decrease in milk volumes in most areas of the nation.
ENERGIES
August Crude Oil is hanging out near the bottom of last week’s range, but it has a lot of room on the upside to consolidate or correct the steep selloff from last Monday’s high. News this morning that Saudi Arabia may raise its August crude oil prices for buyers in Asia by 50-80 cents is lending support. For the inventory reports this week, the early Reuters poll has an average expectation for crude oil stocks to be -2.3 million barrels last week, with distillates expected to be -1.7 million and gasoline +0.7 million. Refinery runs are expected to be +0.4% to 95.1%.
August Natural Gas fell to its lowest level since December 20 overnight, as the forecasts have turned less warm than they were yesterday and there has not been the kind of heat build up that would alter the weekly increases in supply. World Weather Service has low confidence for a strong ridge of high pressure in North America for the next two weeks. The 6-10 day forecast still shows above normal temperature across most of the lower 48, but the 8-14 day has a return of near normal conditions across the central Plains, Midwest, northern Delta, Great Lakes and the northern Atlantic Coast.
DOLLAR INDEX
The USD index fell to its lowest level since February 2022, at $96.7, as mounting concerns over the US fiscal outlook and expectations that the Fed will lower rates sooner rather than later weigh on the dollar. Markets are closely monitoring the tax-cut and spending bill making its way through Congress, which is expected to add $3.3 trillion to the US debt over. The dollar dropped to a nearly four-year low against the euro and a three-and-a-half-year low against the British pound.
COCOA
After a six-day recovery rally off the 200-day moving average, September cocoa sold off sharply overnight and is heading back towards that line this morning. Growing conditions in West Africa look benign. Ivory Coast farmers told Reuters that adequate soil moisture is fostering abundant flowering on trees, pointing to a good start for the main crop.
COFFEE
September Coffee is back near Friday’s six-month low this morning. Brazil has no freeze threat on the horizon that would threaten the current or new crops. Mexico is seeing heavy rains that could cause some flooding, but it also helps reduce their long-standing drought. There are concerns about other growing areas. World Weather Service reports that less than usual rain continues to impact coffee production areas in Indonesia and that the region will need rain soon to protect production potentials.
COTTON
December Cotton was higher overnight following yesterday’s selloff in the wake of the June Acreage report that put US all cotton planted area at 10.12 million acres vs 9.867 million in the March Prospective Plantings report and 9.735 million expected from a pre-report Reuters poll (range 8.800 to 9.985 million). The fact that acreage went up instead of down from the March number and was above the upper end of the expected range was viewed as particularly bearish.
SUGAR
October Sugar was sharply lower overnight, falling through Friday’s low to its lowest level since January 2023. The UNICA report released during the session was slightly bullish against expectations, which lent some support to the session yesterday, but the selling resumed overnight.
PRECIOUS METALS
Gold futures are sharply higher, supported by a weaker dollar and concerns over the US tariffs and the US fiscal outlook. The dollar lowered to its weakest level since 2022, making gold more affordable for foreign investors, as the yellow metal gains more appeal with heightened trade uncertainty with the July 9 deadline approaching.
Silver futures are sharply higher, following the moves in gold, as a weaker dollar and increasing speculation of a Fed interest rate cut broadened its appeal. The long-term outlook for silver remains positive, driven by its essential role in semiconductors, solar panels, and other clean-energy technologies, sectors that continue to attract substantial global investment. That demand has remained robust despite broad headwinds faced in the last few months as a result of tariffs.
Copper futures are higher, supported by demand in top consumer China, as manufacturing data showed that manufacturing activity expanded in June, supported by an increase in new orders that lifted production. Copper prices also found support from a weaker US dollar.
EQUITIES
Stock index futures fell lower as markets await the JOLTS job openings report due at 9:00 a.m. CT today, which is expected to show 7.320 million job openings. The S&P reached as record high yesterday, closing above 6,200 for the first time ever. Investor sentiment was also lifted after Canada rolled back its proposed digital services tax in a move aimed at easing trade tensions with the US.
INTEREST RATES
Futures are higher across the curve as investors await the JOLTS job openings data for May due at 9:00 a.m. CT, which is expected to show 7.320 million job openings. Markets also await Thursday’s nonfarm payroll figures for evidence of a weak job market, which could add to speculation the Fed could cut interest rates sooner rather than later.
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