Written Commentary
SOYBEANS
Bearish crop tour results are pressuring prices to start the week, and traders will watch for additional demand. Pro farmer US yield came in at 54.9 BPA, above USDA’s 53.2. Crop size was estimated at 4.74 billion bushels, above USDA’s 4.589. No doubt these are bearish numbers, but pod-filling weather has featured heat and dryness over some areas of the Midwest, and this afternoon’s crop condition report is expected to show a 1-2% decline. Hot temperatures in the southern Plains and eastern corn belt will finally give way to below normal temperatures by the weekend. The 6 to 10-day outlook shows below-normal precipitation for the northern Midwest and below-normal temperatures for all of the Midwest.
SOYBEAN MEAL
US soymeal futures are starting this week slightly above the contract lows set 2 weeks ago, and price ideas remain weak after the Pro Farmer tour soybean yield results were bearish. Last week’s significant drop in the US Dollar benefits US export potential and may serve to stabilize soy complex prices. US processor maintenance downtime will be reduced by roughly half in September from the August level, but 3 new plants will be coming online in September as well. By October, expect crush plants to throttle up as plenty of beans will be available to take advantage of strong profit margins. The continuation of monthly crush records is expected into winter.
CORN
Despite the lower-than-expected Pro Farmer crop tour results, prices have fallen into new contract lows on the December contract to start the week. Pro Farmer pegged US corn yield at 181.1 BPA, down from USDA’s 183.1, and a crop size of 14.979 billion bushels, the 4th largest in history, but down from 15.147 from USDA. Corn prices have not seen any support from the tour numbers, partly due to the weakness in wheat and beans.
WHEAT
Price erosion continues at the start of this week as Chicago December moves into a new contract low, triggering sell stops and resulting in further technical pressure. The Canadian government forced the railway workers back to work, ending the strike. Other fresh news over the weekend was minimal. Large-scale retaliation by Iran against Israel has yet to occur, and global buyers have yet to step up with significant purchases on market weakness. Ukraine’s Ag Minister says harvest is now 61.3% complete. US dollar weakness has yet to result in a bump-up in US exports.
CATTLE
Friday’s Cattle on Feed report was mildly bearish due to slightly higher placements than expected. Beef in cold storage at the end of July was 99% of last year, similar to expectations. December live cattle futures closed slightly lower Friday but down $15 from the peak in late July.
HOGS
December hogs continued their surprising strength Friday, closing at their highest level since June 18. Friday’s close above the July highs at 70.55 is a positive sign and suggests a run to the moving average resistance at 72.15. Friday’s Cold Storage report had July frozen pork supplies down 5 percent from last month and 4 percent from last year.
MILK – CLASS III
September Class III Milk found early support and rallied to a new contract high before turning sharply lower. It finished the week with a moderate loss and a weekly key reversal. The USDA reported that milk production was mixed across the US last week. Due partly to below-normal temperatures, output was steady to slightly higher in the Upper Midwest, Pacific Northwest, and Central Valley of California.
METALS
In light of increasing tensions in the Middle East, flight to quality buying has supported gold prices. December gold futures are now closing in the record high of 2570.4 that was made on August 20. December silver futures are trading above the $30.65 per ounce level and are hovering near the highest levels in six weeks. December copper futures advanced to the highest level in six weeks.
ENERGIES
Oil prices are sharply higher this morning with the announcement by Libya’s eastern-based government of the closure of all oil fields, thus halting production and exports. Libya has a divided government, and the different factions are in a power struggle, but most oilfields are under the control of eastern Libyan military leader Khalifa Haftar. They currently produce 1 million barrels per day. This comes on top of reports that Israel this weekend launched what it said were “preemptive” strikes against Hezbollah in Lebanon, which raises concerns about expansion of the Israel-Hamas war to a broader area of the Middle East. . October Crude traded to its highest level since August 15 overnight, following a sharp rally last Thursday and Friday
October Natural Gas extended last week’s mild selloff overnight and fell to its lowest level since August 7, despite a heat wave hitting the central US this week. US gas in storage increased last week, widening the surplus to year ago. Storage was up 7.0% from a year ago and 12.5% above average.
STOCK INDEX FUTURES
Stock index futures are mixed as traders assess the impact of Federal Reserve Chair Powell’s dovish comments on Friday, suggesting the Federal Open Market Committee will reduce its fed funds rate at the September policy meeting. Durable goods orders in July increased 9.9% when up 4.5% was expected.
DOLLAR INDEX
A flight to safety flow of funds is supporting the U.S. dollar in light of escalating tensions in the Middle East.
INTEREST RATES
Futures were lower in the overnight trade. However, futures were able to recover and trade higher this morning despite the bearish on balance July durable goods report.
SOFTS
December Cocoa broke out above a two-month trading range last week on new concerns over west African production. Ghana’s Cocobod last week lowered its target quantity for bean purchases to 650,000 metric tons from an earlier prediction of 810,000. Traders are blaming the lack of rain there this summer. Cocobod is looking at a new funding model for bean purchases that will require global traders to deposit at least 60% of the value of their forward contracts at the start of the season.
December NY coffee was slightly lower overnight following a three day setback in the wake of a move to new contract highs last week. London robusta traded to new all-time highs on Friday, but the market is closed today for a UK holiday. The robusta market has drawn support from tight old crop supplies and new found uncertainty regarding Vietnam’s upcoming crop.
December Cotton was higher overnight, continuing its rally off the August 16 contract lows. Dry weather in west Texas has lowered expectations for the upcoming crop. Last week’s crop progress report showed US and Texas crop conditions had fallen to their lowest levels of the year and below the five-year average. The weekly US Drought Monitor showed 30% of the US crop was within an area experiencing drought as of August 20, up from 22% the previous week and 13% on August 6.
October Sugar gapped higher overnight and traded to its highest levels since August 1. The market has seen a strong rally off last week’s 16-month lows. News of fires hitting cane field in the main sugar producing region of Brazil has added to concerns that their drought this year will lead to lower production. A fire last week led to the closure of a large mill owned by Raizen.
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