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Soybean hedgers: Finish 2023-crop sales, reown with short-dated calls... Soybean futures continue to erode technically and have more downside risk if weather remains favorable. We advise soybean hedgers to sell the final 25% of 2023-crop production to get to 100% sold in the cash market. We also advise reowning 25% of old-crop in October $10.50 short-dated serial call options, which keep upside potential open through mid-September.
Cotton producers: Finish 2023-crop sales... Today marks the end of the 2023-24 marketing year for cotton. As a result, we advise cotton hedgers and cash-only marketers to sell the final 10% of 2023-crop production to get to 100% sold.
Fed keeps rates unchanged, but signals cuts coming as soon as September... The Federal Reserve held interest rates steady in a range of 5.25% to 5.50%, as expected, but seemingly suggested a reduction could come as early as the next meeting in September.
“There has been some further progress towards the Committee’s 2% objective,” the post-meeting statement said, noting inflation was “somewhat elevated.” That was a notable change from the last meeting when the statement labeled inflation as “elevated.” In addition, the Fed removed language that it was “highly attentive to inflation risks,” replacing it with an acknowledgement that policymakers were now “attentive to the risks to both sides of its dual mandate,” which includes maintaining maximum employment consistent with the inflation target.
The Fed did not commit in its statement to a rate cut in September, though the wording changes in the statement seem to point in that direction.
J.P. Morgan said, “Historically, the Fed doesn’t sit on the sidelines during election years, but rather continues to pursue its dual mandate of price stability and maximum employment, while maintaining its independence from politics. Since 1980, the Fed has either hiked or cut rates in every single election except 2012, when rates were at zero and the economy was still healing from the financial crisis. Otherwise, the Fed cut rates in five election years and hiked in five election years.”
Without giving “specific forward guidance,” Fed Chair Jerome Powell said, “a rate cut could be on the table at the September meeting,” if inflation continues to decline, economic growth remains reasonably strong and the labor market remains consistent. On timing the first rate cut, Powell noted the Fed’s dilemma... “Go too soon and you undermine progress on inflation, wait too long and you put at risk the recovery.”
Asked about former President Donald Trump’s comments that it would not be right to lower rates ahead of the election, Powell responded: “We don’t change anything in the approach to address the other factors, like the political calendar. Congress has ordered us to conduct our business in a non-political way at all times, not just some of the time. We never use our tools to support or oppose the political party, a politician or any political outcome.”
NASS to review acreage data for August Crop Production Report... USDA’s National Agricultural Statistics Service (NASS) will review all available data, including survey data and information from USDA’s Farm Service Agency and Risk Management Agency, to assess planted and harvested acreage for various crops such as barley, corn, cotton, dry edible beans, oats, peanuts, rice, sorghum, soybeans, sugarbeets, durum wheat, other spring wheat and winter wheat. If the review warrants changes, updated acreage estimates will be published on Aug. 12.
China soymeal stocks reach record level... China’s soymeal stocks reached a record 1.38 MMT as of July 26, according to the China National Grain & Oils Information Center. That was up 29% from the previous month and 86.5% above year-ago. Soybean stocks at crushing plants also continued to rise, totaling 7.12 MMT, up 14.3% from last month and 29.5% more than year-ago.
Rising soybean inventories and record soymeal stocks create a headwinds for U.S. new-crop soybean exports once harvest starts.
U.S. says start of new China tariffs will be delayed at least two weeks... The U.S. Trade Representative’s office said some of the steep U.S. tariff increases on an array of Chinese imports, including electric vehicles and their batteries, computer chips and medical products will be delayed by at least two weeks.
USTR said in May those tariffs would take effect on Aug. 1, but the office said it is still reviewing 1,100 comments received and now expects to issue a final determination sometime in August. The office added the new tariffs will take effect approximately two weeks after the final determination is released.
USDA sees no need for mandatory testing for H5N1 in dairy cattle... USDA Undersecretary Eric Deeble stated that current voluntary measures for H5N1 testing in dairy cattle are effective, making mandatory testing unnecessary. The existing federal order requires testing of lactating dairy animals crossing state lines, but no “extraordinary emergency authority” is warranted.
USDA data shows H5N1 has not significantly impacted U.S. milk production on a national scale.
China enhances flood control, disaster relief... Remnants of Typhoon Gaemi are causing torrential rains in Northeast China, affecting key agricultural provinces (Liaoning, Jilin, Heilongjiang), causing damage to rice, corn and soybean crops, as well as greenhouses and livestock. In response, acting agriculture minister Han Jun has prioritized flood control and disaster relief, providing around 238 million yuan in emergency funds for farmers in flood-affected central and southwestern China. This is the sixth emergency fund allocation this year, totaling 11.5 billion yuan in disaster relief funds.
Coordination with meteorological, water management and emergency personnel is being improved. Support is being provided to flood-hit areas to resume agricultural production, while monitoring of food security impacts on key crops’ supply chains.
WTO expects merchandise trade growth to exceed the long-term average this year... The World Trade Organization (WTO) reiterated its expectation that merchandise trade growth will surpass the long-term annual average this year and is set to accelerate into 2025. The recovery from last year’s slump in goods trade is uneven, with Asia being the primary driver of exports and imports. WTO is optimistic about 2025, predicting that all regions will contribute to export and import growth. However, longer-term projections carry more uncertainty. Services trade, particularly in digital commerce and travel, is growing at a much faster rate than goods trade.
Despite the positive outlook, global trade faces significant challenges, including wars, diplomatic tensions, the climate crisis, and rising protectionism. WTO Director-General Ngozi Okonjo-Iweala acknowledged these difficult times for global trade.