Good morning!
Corrective buying in grains overnight... Soybeans led a round of corrective gains in grain and soy futures during the overnight session. As of 6:30 a.m. CT, corn futures are trading 2 cents higher, soybeans are 4 to 12 cents higher and wheat futures are 2 to 4 cents higher. The U.S. dollar index is more than 350 points higher and front-month crude oil futures are around 50 cents higher.
Neutral ENSO conditions continue... Sea surface temperatures (SSTs) in the central Pacific have been cooling since December, though the rate of cooling declined in June. The Australian Bureau of Meteorology says climate models suggest SSTs in the central tropical Pacific are likely to continue to cool for at least the next two months. Four of 7 models suggest SSTs are likely to remain at neutral ENSO levels, and the remaining 3 suggest the possibility of SSTs at La Niña levels. The bureau’s ENSO Outlook is at La Niña Watch due to early signs that an event may form in the Pacific Ocean later in the year.
Mexico: Corn export levels undermine Washington’s USMCA case... The ongoing dispute between the U.S. and Mexico over genetically modified (GM) corn imports has reached a critical juncture, with Mexico arguing that rising levels of U.S. white corn exports undermine Washington’s claims that Mexico’s restrictions on genetically engineered corn are harming trade. This dispute is being addressed under the United States-Mexico-Canada Agreement (USMCA). The other factor in the dispute that bears watching is the incoming Mexican administration. The new president is viewed as being more favorable toward GMOs even though she’s from the same party as the previous president who issued the decree to ban GM corn. A decree like the one deployed in Mexico could easily be reversed or removed by a subsequent administration.
Iowa Utilities Board approves Summit Carbon Solutions pipeline... The Iowa Utilities Board approved the Summit Carbon Solutions pipeline on Tuesday, allowing the company to use eminent domain to acquire land. Construction is slated to begin next year, aiming for operation by 2026. The pipeline will transport liquified carbon dioxide from ethanol plants in Iowa and neighboring states to North Dakota. The approval is contingent on securing necessary permits in South Dakota and North Dakota. The pipeline will span over 2,000 miles, including nearly 700 miles in Iowa, with 75% of the Iowa route’s landowners signing voluntary easement agreements. However, the project has faced significant opposition from farmers, environmentalists and safety advocates. Critics argue the pipeline benefits corporations at the expense of rural communities and poses safety risks without significantly reducing climate pollution. Summit Carbon Solutions hailed the approval as a significant milestone, anticipating continued progress with permit reconsiderations in North Dakota and new applications in South Dakota.
United Airlines exec stresses need for oil industry cooperation for SAF viability... United Airlines Chief Sustainability Officer Lauren Riley emphasized the critical need for cooperation with the oil industry to make sustainable aviation fuel (SAF) economically viable, citing the lack of infrastructure as a major hurdle in an interview with the Financial Times. SAF, mainly made from recycled cooking oil and other sources like household waste, currently costs at least twice as much as traditional jet fuel. Riley pointed out the inefficiency and higher costs associated with transporting SAF by barge compared to using the existing infrastructure for traditional aviation fuel. She also noted the challenges SAF manufacturers face in securing investment and support to scale up production. Expressing optimism about future innovations, Riley mentioned the potential of “power to liquid” fuels or e-fuels, which are produced using electricity to extract hydrogen from water and carbon from the air to create synthetic hydrocarbons. Despite their higher costs and low production levels, she believes these innovations are promising.
EU tweaks tariff rates on Chinese EVs... The European Commission marginally revised its proposed tariffs on electric vehicles (EVs) imported from China after receiving more information from the affected companies, a person familiar with the matter told Bloomberg. EV producers in China that cooperated with the investigation but have not been sampled will be subject to a weighted average duty of 20.8%, while firms that didn’t cooperate will face an additional 37.6% levy. The original proposal was a tariff of up to 38.1%. The provisional tariffs are set to be introduced on July 4 with definitive duties kicking in by November. Chin and the EU are currently in negotiations on the situation.
Yen tumbles, sparking ideas of intervention... The yen tumbled to the weakest level since 1986, raising speculation Japanese authorities may act to support the currency again. The yen overnight fell below levels that led officials to intervene in the market in April. The vast gap between interest rates in Japan and the U.S. has kept pressure on the yen despite attempts to stem its slide. The yen has lost more than 12% of its value this year alone, hurting Japanese consumers and causing growing unease among businesses.
USDA announces H5N1 testing pilot programs for dairy farms in four states... USDA announced Kansas, Nebraska, New Mexico and Texas will launch voluntary pilot programs to test bulk milk tanks on dairy farms for the H5N1 virus. This initiative aims to facilitate the interstate movement of herds and help public health officials track the virus’s spread. Additional states are expected to join soon. Farmers in the program can move herds across state lines without extra testing after three consecutive weeks of negative tests for H5N1 in bulk milk tanks. They must continue regular weekly testing.
Wholesale beef market remains strong... Wholesale beef prices firmed 75 cents for Choice and 19 cents for Select on Tuesday, while movement improved to 121 loads. Strength in wholesale beef prices hasn’t kept pace with the surge in cash cattle prices, but it has been enough to keep packer cutting margins in the black. Cash sources expect cash cattle prices to be steady at best this week, though positive margins could keep prices from falling much.
Cash hog fundamentals continue to weaken... The CME lean hog index is down a nickel to $89.85 as of June 24, the seventh decline in the last eight days and the lowest value since April 10. The pork cutout fell $2.52 on Tuesday to $95.31, the lowest level since April 3. Weakening cash fundamentals are weighing on futures and signaling the market posted an unusually early seasonal top this year.
Overnight demand news... Egypt purchased 470,000 MT of wheat, including 180,000 MT Russian, 180,000 MT Romanian, 60,000 Ukrainian and 50,000 MT Bulgarian.
See ‘Policy Updates’ for late-breaking morning news updates... For updates to items in “First Thing Today” or any late-breaking morning news stories, check “Policy Updates” on www.profarmer.com.
Today’s reports
- 9:30 a.m. Weekly Ethanol Production — EIA
- 2:00 p.m. Broiler Hatchery — NASS
- 2:00 p.m. Peanut Stocks and Processing — NASS