Grains retreat after an overnight higher start.

Grain futures opened higher overnight, supported by a strong start in crude oil, but similar to energy, the market reaction faded into the evening. As noted in yesterday afternoon's report, a higher crude oil open was anticipated due to threats of closing the Strait of Hormuz, a key route through which 20% of the world’s oil supply flows. However, Iran has made similar statements on numerous occasions over the past few decades. Currently, the U.S. 5th Fleet is positioned near the Strait to monitor the situation and prevent closure. Given that a significant portion of China’s crude imports pass through this corridor, China may step in diplomatically or otherwise if Iran follows through. Meanwhile, U.S. crude oil supplies remain plentiful, limiting price spikes. Iran has also vowed retaliation against the U.S., and any such action could have a more significant market impact than the initial threats.

Aside from geopolitical headlines, U.S. weather remains a key factor this week. Much of the Corn Belt experienced record heat over the weekend, with a few more hot days expected before conditions moderate. Rain is forecast to follow, which could be favorable for crop development in many regions. Some uneven crop stands are being reported, mainly in the Eastern Corn Belt, due to earlier spring weather variability. Drought has largely been erased in the Eastern Corn Belt, but dry conditions persist across the Upper Plains, Iowa, southern Wisconsin, and northern Illinois. Although this area is relatively small in geographic terms, it is highly productive and significantly influences national yield outcomes. These conditions are not outright threatening, but they also do not justify current trendline yield expectations.

The Commitment of Traders report, normally released on Friday, will be delayed until this afternoon due to last week’s holiday. It is expected to show that index funds have significantly reduced their net short position in wheat, while adding long positions in soybeans and soybean oil following last week’s EPA announcements. Spot corn futures continue to weaken, while soybeans are pulling back on the non-threatening weather forecasts.

Uncertainty remains around trade negotiations. Reciprocal tariffs are set to increase again on July 9 unless a resolution is reached. Talks with China are ongoing, with hopes that an agreement could be finalized by August, potentially reviving Chinese demand for U.S. soybeans. Additionally, the June 30 Acreage and Quarterly Stocks report is due next Monday, a key event for market positioning.

In livestock, Friday’s Cattle on Feed report showed placements at 92% of last year, a friendly figure relative to trade expectations. Equity markets softened overnight but have since recovered, while crude oil has faded after an initial surge. This combination may support a firmer start for live and feeder cattle this morning. August live cattle futures ended last week lower and posted an outside-day-down pattern on Friday. The development of today’s session will indicate how the market views the current discount between futures and cash.

Last week’s negotiated fed cattle trade confirmed a correction in cash values. Northern live sales fell $7 to $236, Kansas was down $5 to $231, and Texas lost $7, trading at $228. This marks a significant retreat, suggesting the seasonal highs in the cash market are now behind us. The futures market’s discount to cash prices will likely continue to create volatile daily price action.

Cattle slaughter last week totaled 554,000 head, down 4,000 from the previous week and 62,000 fewer than the same week last year. Boxed beef values surged, with choice cuts gaining $1.62 and select up $3.45. Meanwhile, the outlook for the return of Mexican feeder cattle to the U.S. remains unclear. The Secretary of Agriculture has stated that new protocols are being developed, but no timeline has been provided, keeping the market on edge.87